Ground Properties Company Limited 廣澤地產有限

The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof.

Application Proof of

GROUND PROPERTIES COMPANY LIMITED 廣澤地產有限公司 (the “Company”) (a company incorporated in Bermuda with limited liability) (Stock Code: 989)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Exchange”)/ the Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the public in Hong Kong.

This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sponsor, advisers or member of the underwriting syndicate that: (a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; (b) the publication of this document or supplemental, revised or replacement pages on the Exchange’s website does not give rise to any obligation of the Company, its sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering; (c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; (d) the Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Listing Rules; (e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; (f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; (g) neither the Company nor any of its affiliates, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; (h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted; (i) the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; (j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and (k) the application to which this document relates has not been approved for listing and the Exchange and the Commission may accept, return or reject the application for the subject public offering and/ or listing.

If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong and the offer documents to be issued by the Company, copies of which will be distributed to the public during the offer period. THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your securities in GROUND PROPERTIES COMPANY LIMITED, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. This circular is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company. This circular is being provided to you solely for the purposes of considering the resolutions to be voted upon at the SGM of the Company to be held on [●][●] 2016.

GROUND PROPERTIES COMPANY LIMITED 廣澤地產有限公司 (Incorporated in Bermuda with limited liability) (Stock Code: 989) (1) VERY SUBSTANTIAL ACQUISITION (2) CONNECTED TRANSACTION (3) REVERSE TAKEOVER INVOLVING A NEW LISTING APPLICATION (4) ISSUE OF CONVERTIBLE BONDS AND CONVERTIBLE PREFERENCE SHARES, AND ISSUE OF SHARES UNDER SPECIFIC MANDATE (5) INCREASE IN AUTHORISED SHARE CAPITAL AND (6) AMENDMENT OF BYE-LAWS Joint Sponsors to the deemed new listing application of the Company

Financial Adviser to the Company

Independent Financial Adviser to the Independent Board Committee and to the Independent Shareholders

A letter from the board of directors of the Company is set out on pages [37] to [79] of this circular. A notice convening a special general meeting of the Company (the “SGM”) to be held at [●]on[REDACTED]at [●], Hong Kong is set out on pages SGM-1 to SGM-4 of this circular. A form of proxy for use at the SGM is enclosed herewith. Whether or not you are able to attend and vote at the SGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar of the Company, Tricor Abacus Limited at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof (as the case may be). Completion and return of the form of proxy will not preclude you from attending and voting at the SGM or any adjournment thereof (as the case may be) should you so wish and in such event, the instrument appointing a proxy previously submitted shall be deemed to be revoked.

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CONTENTS

Page

EXPECTED TIMETABLE ...... iii

SUMMARY ...... 1

DEFINITIONS ...... 15

GLOSSARY OF TECHNICAL TERMS ...... 29

CORPORATE INFORMATION ...... 31

DIRECTORS AND PARTIES INVOLVED ...... 33

LETTER FROM THE BOARD ...... 37

LETTER FROM THE INDEPENDENT BOARD COMMITTEE ...... 80

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ...... 82

FORWARD-LOOKING STATEMENTS ...... 122

RISK FACTORS ...... 125

HISTORY AND REORGANISATION OF THE TARGET GROUP ...... 158

BUSINESS OF THE TARGET GROUP ...... 178

RELATIONSHIP WITH CONTROLLING SHAREHOLDERS ...... 254

CONTINUING CONNECTED TRANSACTIONS ...... 260

DIRECTORS AND SENIOR MANAGEMENT OF THE ENLARGED GROUP . 265

WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES ..... 278

FINANCIAL INFORMATION OF THE TARGET GROUP ...... 282

SHARE CAPITAL ...... 333

SUBSTANTIAL SHAREHOLDERS ...... 337

APPENDIX I – INDUSTRY OVERVIEW ...... I–1

APPENDIX II – REGULATORY OVERVIEW ...... II–1

APPENDIX IIIA – ACCOUNTANTS’ REPORT ON THE TARGET GROUP . IIIA–1

–i– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CONTENTS

Page

APPENDIX IIIB – ACCOUNTANTS’ REPORT ON WAN SHENG ...... IIIB–1

APPENDIX IV – FINANCIAL INFORMATION OF THE GROUP ...... IV–1

APPENDIX V – UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP ...... V–1

APPENDIX VIA – PROPERTY VALUATION OF THE GROUP ...... VIA–1

APPENDIX VIB – PROPERTY VALUATION OF THE TARGET GROUP . . . VIB–1

APPENDIX VIC – VALUATION REPORT OF WAN SHENG ...... VIC–1

APPENDIX VII – SUMMARY OF THE CONSTITUTION OF THE COMPANY AND BERMUDA COMPANY LAW ...... VII–1

APPENDIX VIII – STATUTORY AND GENERAL INFORMATION ...... VIII–1

APPENDIX IX – DOCUMENTS AVAILABLE FOR INSPECTION ...... IX–1

NOTICE OF SGM ...... SGM–1

–ii– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. EXPECTED TIMETABLE

[REDACTED]

– iii – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

This summary aims at giving you an overview of the information contained in this circular. As it is a summary, it does not contain all the information that may be important to you. You should read the whole circular before making a decision as to how you would cast your votes at the SGM in relation to, inter alia, the Acquisition and the appropriate course of action for yourself.

There are risks associated with any business. You should read the section headed “Risk Factors” in this circular carefully before making a decision on, inter alia, the Acquisition.

THE ACQUISITION

On 26 May 2015, Frontier Power Investments Limited (being a wholly-owned subsidiary of the Company) as the Purchaser, Ka Yik Investments Limited as the Vendor and Ms. Cui (being the Vendor’s guarantor) entered into the Initial Agreement pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the [REDACTED] which represent the entire issued share capital in the Target Company, namely Ka Yun Investments Limited, at the consideration of HK$4,650,000,000. On 3 July 2015, the parties entered into the Supplemental Agreement pursuant to which the parties agreed to, among other matters, amend the settlement method of the Consideration, such that it shall be satisfied partly (i) by allotment and issue of Consideration Shares by the Company; (ii) by allotment and issue of Convertible Preference Shares by the Company; and (iii) by issue of Convertible Bonds by the Company. On 22 December 2015, the parties entered into the Second Supplemental Agreement pursuant to which the parties agreed to, among other matters, revise the number of [REDACTED] in light of the then expected [REDACTED] of the Target Company, the revision of certain conditions precedent and the extension of the long-stop date by which the conditions precedent to the Acquisition should be fulfilled or waived, as the case may be, to 12:00 noon, 31 March 2016.

The Vendor is a company ultimately beneficially wholly-owned by Ms. Cui who is a controlling Shareholder of our Company and daughter of Ms. Chai, who in turn is an executive Director and the chairperson of the Board. The Target Company is a limited liability company incorporated in the BVI which, together with its subsidiaries as the Target Group, is principally engaged in the development, sale and leasing of residential, commercial and tourism properties and property management in the PRC. As at the Latest Practicable Date, the property portfolio of the Target Group comprised seven property projects all situated in Jilin Province. As at the date of this circular, the Group is interested in 35% of a sub-group of the Target Group.

The Acquisition is conditional upon satisfaction of a series of conditions precedent. One of the conditions precedent to the Acquisition is that the aggregate amount of (i) the aggregate value of the Target Properties as shown in the valuation report set out in Appendix VIB to this circular; and (ii) the amount of recognised sale of the Target Properties as set out in the Post-Signing Accounts should not be less than the Target Value (being RMB7,720,500,000).

Please refer to the section headed “Letter from the Board” in this circular starting on page [37] for further details of, among others, the Acquisition, the Convertible Bonds, the Convertible Preference Shares and the Consideration Shares.

–1– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

After Completion, the Target Group will become the principal property development arm of the Enlarged Group whereas the Enlarged Group intends to continue its businesses in the provision of telecommunications retail sales and management services and property investment. As at the date of this circular, the Company does not expect changes to the composition of the Board by reason of the Acquisition immediately after Completion.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Directors (including the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular) consider the Acquisition is in the interests of the Company and the Independent Shareholders as a whole due to the following reasons:

(a) the Target Group is already generating profit;

(b) following Completion, the Enlarged Group can leverage on the platform of the Target Group to accelerate property development business and create additional value for its Shareholders;

(c) the Enlarged Group will have a larger asset base, thereby strong capacity to raise funds for its long term development; and

(d) the Target Group is a local property developer in Jilin Province and its management team and track record can help the Enlarged Group to further develop its property development and management business in Jilin Province and better position the Enlarged Group to expand into other provinces when the opportunity arises.

Please refer to the paragraph headed “Reasons for and Benefits of the Acquisition” in the section headed “Letter from the Board” in this circular starting on page [37] for further elaboration of these reasons and benefits.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL OF THE COMPANY AND AMENDMENT OF BYE-LAWS

In connection with the Acquisition, the Board proposes to increase the Company’s authorised share capital from HK$780,000,000 divided into 15,600,000,000 Shares of HK$0.05 each to HK$1,006,967,647.05 divided into 15,600,000,000 Shares of HK$0.05 each and 4,539,352,941 Convertible Preference Shares of HK$0.05 each by the creation of 4,539,352,941 Convertible Preference Shares. The proposed increase in the authorised share capital of the Company is conditional upon passing an ordinary resolution by the Shareholders at the SGM.

In order to facilitate the issue of the Convertible Preference Shares on the terms thereof, it is proposed that the Bye-laws of the Company be amended. The proposed amendment of the Bye-laws is conditional upon passing a special resolution by the Shareholders at the SGM.

–2– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Please refer to the paragraphs headed “Increase in authorised share capital” and “Amendment of Bye-laws” in the section headed “Letter from the Board” in this circular starting on page [37] for further details of the proposed increase of the authorised share capital of the Company and the amendment of the Bye-laws respectively.

IMPLICATIONS UNDER THE LISTING RULES IN RELATION TO THE ACQUISITION

The Acquisition constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules as the applicable percentage ratios of the Acquisition are over 100%. The Acquisition also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules as the Vendor is a connected person of the Company by virtue of it being ultimately beneficially wholly-owned by Ms. Cui (a controlling Shareholder of the Company), whereby the applicable percentage ratios are over 100%. Accordingly, the Acquisition is subject to the approval of the Independent Shareholders at the SGM. At the board meeting approving the Acquisition on 26 June 2015, Ms. Chai, mother of Ms. Cui and an executive Director and the chairperson of the Board, has not been counted as quorum and has abstained from voting in relation thereto.

In addition, the Acquisition constitutes a reverse takeover of the Company under Rule 14.06(6)(b) of the Listing Rules on the basis that the Acquisition (i) constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules; and (b) it involves acquisition of assets from the Vendor (which is an associate of Charm Success, a controlling Shareholder) pursuant to the Sale and Purchase Agreement of which the Initial Agreement and the Supplemental Agreement were entered into within 24 months after Charm Success having gained control (as defined in the Takeovers Code) of the Company. Accordingly, under Rule 14.54 of the Listing Rules, the Company is being treated as if it were a new [REDACTED]. The Acquisition is therefore subject to the approval of the Independent Shareholders as well as the approval of the Listing Committee of a new [REDACTED] made by the Company. Such new [REDACTED] of the Company is required to comply with all the requirements under the Listing Rules, in particular the requirements under Chapters 8 and 9 of the Listing Rules.

China Galaxy International Securities (Hong Kong) Co., Limited and Octal Capital Limited, as the Joint Sponsors, submitted to the Stock Exchange a [REDACTED] on behalf of the Company on 31 December 2015. The Listing Committee [has given] its approval in principle of the new [REDACTED] of the Company.

BUSINESS OF THE TARGET GROUP

The Target Group is a property developer in Jilin Province of the PRC principally engaged in the development, sale and leasing of residential, commercial and tourism properties, as well as property management. As at the Latest Practicable Date, the property portfolio of the Target Group comprised seven property projects all situated in Jilin Province:

• Residential projects: Guangze•Amethyst City (廣澤•紫晶城), Guangze•Tudors Palace (廣澤•瀾香), Guangze China House (廣澤蘭亭), Guangze Red House (廣

–3– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

澤紅府) and the residential portion located above Guangze International Shopping Centre (廣澤國際購物中心－住宅)

• Commercial property project: Guangze International Shopping Centre (廣澤國際購物中心)

• Tourism property project: Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村)

Please refer to the paragraph headed “Description of Property Projects” in the section headed “Business of the Target Group” in this circular for further details of the business and property portfolio of the Target Group.

The Target Group operates in a highly fragmented and competitive property development industry in the PRC. From time to time, the Target Group encounters intense competition from other property developers on all fronts. The existing and potential competitors of the Target Group include major domestic property developers in the PRC who develop and operate property projects in nearby locations. For details of the competitive landscape of the Target Group, please refer to the paragraph headed “Competition” in the section headed “Business of the Target Group” and section headed “Industry Overview” set out in Appendix I to this circular.

COMPETITIVE STRENGTHS AND BUSINESS STRATEGIES OF THE ENLARGED GROUP

The Directors believe that the principal competitive strengths of the Enlarged Group will include: (i) the dedicated geographical focus and regional competitiveness in Jilin Province of the PRC; (ii) the demonstrated track record in building a balanced property portfolio and diversified product offering and income sources; (iii) the ability to identify and acquire land at locations which the Directors of the Enlarged Group believe to be suitable for property projects development within Jilin Province; (iv) the commitment to develop quality property projects, provide professional property management services and business operational management services; and (v) the experienced and skilled management team under the leadership of the chairperson of the Board, Ms. Chai.

To continue expanding its property portfolio and seeking sustainable growth, the Enlarged Group intends to pursue such principal business strategies including: (i) to strategically pace its property development in Jilin Province of the PRC and acquire land reserves at locations which the Directors of the Enlarged Group believe to be suitable and expand into new target markets to sustain future growth; (ii) to continue to adopt a diversified property development strategy and maintain a balanced property portfolio; (iii) to continue to promote the “Ground Properties” brand to strengthen brand recognition in the property development market; and (iv) to retain and attract talented personnel by offering competitive remuneration packages and comprehensive training programmes.

Please refer to the respective paragraphs headed “Competitive Strengths” and “Business Strategies” in the section headed “Business of the Target Group” in this circular for further elaboration of these strengths and strategies.

–4– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

RISK FACTORS

The Directors believe that there are certain risks relating to the Acquisition, the business of the Enlarged Group, the property development in the PRC, conducting business in the PRC as well as risks relating to this circular. Some of the material risks relating to the business of the Enlarged Group include but are not limited to (i) the performance of the Enlarged Group will be largely dependent on the performance of the PRC property market, particularly in the cities where the Enlarged Group operates and intends to operate; (ii) there is no assurance that the Enlarged Group will always be able to successfully identify and acquire suitable land for development at a competitive cost; (iii) the Target Group generated revenue principally from the sale of properties, which depends on a number of factors including the schedule of its property development and the timing of property sales; (iv) the Enlarged Group may not be able to complete its property development projects or deliver its properties on time, on budget, or at all; (v) expansion into new geographical markets may impact the performance, profitability and results of operations of the Enlarged Group; (vi) there is no assurance that the Enlarged Group will be able to attract and retain quality tenants for its investment properties; (vii) the business of the Enlarged Group is subject to extensive government regulations, and the PRC government may introduce further measures to curtail growth in the property sector; and (viii) the Enlarged Group faces intense competition from other real estate developers in the PRC.

These aforementioned risks are not the only risks which may affect the business, results of operations and financial conditions of the Enlarged Group. Please refer to the section headed “Risk Factors” in this circular for further elaboration of the various risks.

SUPPLIERS AND CUSTOMERS

The suppliers of the Target Group primarily include domestic construction contractors and construction materials suppliers in the PRC. The five largest suppliers of the Target Group, which are construction contractors, accounted for approximately 44.9%, 70.5%, 42.5% and 54.1% respectively of the Target Group’s total purchases for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively. The length of relationship of the five largest suppliers with the Target Group was between two to five years. Purchases from the largest supplier accounted for approximately 11.5%, 25.1%, 15.9% and 24.8% respectively, of the Target Group’s total purchases for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively.

For the residential properties which were developed for sale, the customers of the Target Group in the Track Record Period were mainly individual purchasers or investors from the PRC. For the commercial properties which were developed for sale, the customers of the Target Group in the Track Record Period were individual entrepreneurs or business enterprises from the PRC. The five largest customers of the Target Group accounted for approximately 5.5%, 0.7%, 1.4% and 7.2%, respectively, of its total revenue for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively. During the Track Record Period, sales to the largest customer of the Target Group accounted for approximately 3.3%, 0.2%, 0.4% and 2.3% respectively of its total revenue for the relevant period.

–5– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

SUMMARY FINANCIAL INFORMATION OF THE TARGET GROUP

Summary of consolidated statements of comprehensive income of the Target Group

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Revenue 530,975 553,117 805,611 635,356 808,836 Cost of sales and services (393,592) (414,257) (601,275) (462,175) (459,960)

Gross profit 137,383 138,860 204,336 173,181 348,876

Fair value gain of investment properties 123,176 56,673 151,948 118,248 17,732

Profit before tax 201,121 120,770 257,352 231,006 301,583 Income tax expense (60,405) (29,812) (57,100) (51,869) (141,669)

Profit for the year/period 140,716 90,958 200,252 179,137 159,914

Revenue breakdown by source

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB’000 % RMB’000 % RMB’000 % RMB’000 % RMB’000 %

Sales of properties held for sale 526,555 99 543,958 98 794,241 99 627,002 99 781,077 97 Gross rental income from investment properties – – – – – – – – 10,406 1 Property management and related services 4,420 1 9,159 2 11,370 1 8,354 1 17,353 2

Total 530,975 100 553,117 100 805,611 100 635,356 100 808,836 100

–6– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Summary of consolidated statements of financial position of the Target Group

As at As at 31 December 31 August 2012 2013 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000

Non-current assets 206,801 362,822 674,276 694,625

Current assets 2,466,945 3,244,887 4,353,021 3,713,629

Current liabilities 1,997,307 2,545,452 3,211,105 2,906,894

Non-current liabilities 333,004 627,864 596,536 544,369

Net current assets 469,637 699,434 1,141,916 806,735

Net assets 343,434 434,393 1,219,656 956,992

Summary of consolidated statements of cash flows of the Target Group

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Net cash generated from (used in) operating activities 25,350 (347,277) 88,678 251,492 (52,964)

Net cash used in investing activities (74,876) (94,416) (147,149) (78,885) (3,875)

Net cash generated from (used in) financing activities 253,734 297,724 (24,798) (102,715) 181,144

KEY FINANCIAL RATIOS

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2015

Gross profit margin (%) 25.9% 25.1% 25.4% 43.1% Net profit margin (%) 26.5% 16.4% 24.9% 19.8% Return on equity (%) 41.0% 20.9% 16.4% 16.7% Current ratio (times) 1.24 1.27 1.36 1.28 Gearing ratio (%) 11.7% 24.4% 25.6% 40.0%

–7– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

For details of the notes to the above key financial ratios, please refer to the paragraph headed “Key Financial Ratios” in the section headed “Financial Information of the Target Group” in this circular starting on page 330.

SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The table below sets out selected unaudited pro forma financial information of the Enlarged Group. Further details are set out in Appendix V to this circular.

RMB’000

Pro forma net assets of the Enlarged Group attributable to owners of the Company 1,354,694 Less: Goodwill and intangible assets (4,999)

Pro forma net tangible assets of the Enlarged Group attributable to owners of the Company 1,349,695

Number of shares

Divided by: Shares outstanding on 30 September 2015 858,450,000 Consideration Shares to be issued upon Completion 343,000,000

1,201,450,000

Pro forma net tangible assets attributable to owners of the Company per Share (RMB) 1.12

PROPERTY VALUATION OF THE TARGET GROUP AS AT 31 OCTOBER 2015

As at 31 October 2015, the aggregate appraised market value attributable to the Target Group of properties held for investment, properties held for sale, properties held under development and properties held for future development was approximately RMB660.0 million, RMB897.7 million, RMB1,956.0 million and RMB3,310.0 million, respectively. The valuation method adopted by Savills was based on the direct comparison approach by making reference to comparable sale evidences available, the income capitalisation method on the basis of capitalisation of incomes as shown on the provided schedules with due allowance for reversionary income potential, and also taking into account the presold area and consideration, as well as estimated total and expended costs.

–8– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

The following information is extracted from the valuation report set out in Appendix VIB to this circular, summarising Savills’ valuation of each of the property projects of the Target Group and the selected key assumptions used by Savills in its valuation. Please refer to the section headed “Property Valuation of the Target Group” set out in Appendix VIB to this circular for further details, including the background to these assumptions.

The valuations of the Target Group’s properties contained in the valuation reports set out in Appendix VIB to this circular are prepared based on various valuation methodologies, bases and assumptions with reference to different property categorisations, natures, types, usages and development status. These assumptions, by their nature, are subjective and uncertain, and may not be realised. Please refer to the paragraph headed “Risks relating to the business of the Enlarged Group – The appraised value of the properties in the valuation report may be different from the actual realisable value and is subject to change” in the section headed “Risk Factors” in this circular for further information.

Reference to Market value valuation in existing state report as set attributable to out in the Target Appendix VIB Group as at Valuation approach (No. of Projects 31 October 2015 and key assumptions property)

Guangze International Shopping RMB660,000,000 Income capitalisation 1 Centre (for investment) approach: (廣澤國際購物中心) monthly unit rental of RMB83/sq.m. for commercial and capitalisation rate of 5.25%

RMB369,000,000 Direct comparison approach: 2 (for sale) unit rates of RMB4,800/sq.m. for residential, RMB20,000/sq.m. for commercial; RMB170,000/bay for car park

Guangze• Amethyst City Phase I RMB90,700,000 Direct comparison approach: 3 (廣澤•紫晶城一期) unit rates of RMB5,000/sq.m. for residential, RMB14,200/sq.m. for commercial; RMB184,000/bay for car park

–9– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Guangze• Amethyst City RMB438,000,000 Direct comparison approach: 4 Phase II and Relocated District unit rates of RMB5,000/sq.m. (廣澤•紫晶城二期和回遷區) for residential, RMB12,500/sq.m. for commercial; RMB133,000/bay for car park

Phase I of Guangze China House RMB308,000,000 Direct comparison approach: 5 (廣澤蘭亭一期) unit rates of RMB5,700/sq.m. for residential, RMB8,600/sq.m. for commercial; RMB153,000/bay for car park

Phase II of Guangze China House Nil Nil 10 (廣澤蘭亭二期) (Note 1)

Guangze•Tudors Palace RMB1,143,000,000 Direct comparison approach: 6 (廣澤•瀾香), unit rates of RMB16,400/sq.m. for residential, RMB14,200/sq.m. for commercial

Guangze Red House Phase I RMB296,000,000 Direct comparison approach: 7 (廣澤紅府一期), unit rates of RMB6,000/sq.m. for residential, RMB20,100/sq.m. for commercial; RMB150,000/bay for car park

Guangze Red House Phase II RMB209,000,000 Direct comparison approach: 8 (廣澤紅府二期), unit rates of RMB5,300/sq.m. for residential, RMB15,800/sq.m. for commercial; RMB120,000/bay for car park

–10– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

Changbaishan Ground Pine RMB2,151,500,000 Direct comparison approach: 9 Township International Resort (65% interest accommodation values of (長白山廣澤果松小鎮國際度假村) attributable to RMB2,780/sq.m. for the Target residential land, Group) RMB2,790/sq.m. for (Note 2) commercial land; RMB430/sq.m. for other uses land (Note 3)

Note:

1. In the course of valuation, Savills has assigned no commercial value to Phase II of Guangze China House as the Enlarged Group has not obtained any valid title documents as at 31 October 2015.

2. The remaining 35% interest of the property is vested in the Group.

3. Accommodation value is the value of the sale price analysed on basis of per sq.m. of the permissible gross floor area and is a common way of analysis of land sale transaction.

HISTORICAL NON-COMPLIANCE INCIDENTS

Certain members of the Target Group was involved in several incidents of regulatory non-compliance in PRC during the Track Record Period including non-compliance relating to, among other matters, failure to place pre-sale proceeds into designated custodial accounts, unauthorised occupation of land and delivery of property units of prior to obtaining the relevant certificates. Please refer to the paragraph headed “Historical Non-compliance Incidents” in the section headed “Business of the Target Group” in this circular starting on page [178] for further details of such incidents.

RECENT DEVELOPMENT

Revenue for the ten months ended 31 October 2015 of the Target Group

Based on its unaudited management accounts for the ten months ended 31 October 2015, the revenue for the ten months ended 31 October 2015 of the Target Group was RMB837,772,560, representing an increase of 3.6% as compared to revenue of RMB808,836,051 for the eight months ended 31 August 2015. The increase was primarily due to delivery of properties resulting in more sales of properties recognised. Also, the Target Group generated more rental income and property management service fee income during the period from 31 August 2015 to 31 October 2015.

–11– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

No material adverse change since 31 August 2015

Save as disclosed above, the Directors confirm that there has been no material adverse change in the Target Group’s business operations, financial position or prospect since 31 August 2015 (being the date to which the last audited financial information of the Target Group were prepared) and up to the date of this circular, and there is no event since 31 August 2015 which would materially affect the information shown in the financial information of the Target Group set out in Appendix IIIA to this circular respectively. So far as the Directors are aware, there has been no material change in the general condition of the property development industry in which the Target Group operates which has materially and adversely affected the results of operation or financial condition of the Target Group since 31 August 2015 and up to the date of this circular.

CONTROLLING SHAREHOLDERS AND CONTINUING CONNECTED TRANSACTIONS

As at the Latest Practicable Date, Charm Success held approximately 65% of the issued share capital of the Company. Ms. Cui is the sole shareholder of Charm Success and accordingly, Ms. Cui had an indirect interest in approximately 65% of the issued share capital of the Company. Upon Completion (assuming no Convertible Bonds and Convertible Preference Shares have been converted), Charm Success and Ka Yik will be directly interested in approximately [REDACTED] and [REDACTED] of the issued share capital of the Company respectively and Ms. Cui, as the sole legal and beneficial owner of Charm Success and Ka Yik, will in aggregate be indirectly interested in approximately [REDACTED] of the issued share capital of the Company, and accordingly, Ms. Cui and Charm Success will be the controlling Shareholders of the Enlarged Group.

During the Track Record Period, there were several transactions having been entered into between the Group and the relevant connected persons of the Company. Some of these transactions would be considered de minimis continuing connected transaction for the Company under Chapter 14A of the Listing Rules upon Completion of the Acquisition and thus are exempt from annual review, all disclosure and shareholders’ approval requirements, whereas one such transaction will become an intra-group transaction because the relevant contract party will become a member of the Enlarged Group and will not constitute a connected transaction upon Completion. Please refer to the section headed “Continuing Connected Transactions” in this circular for further information.

FINANCIAL ADVISER, JOINT SPONSORS, INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

China Galaxy International Securities (Hong Kong) Co., Limited has been appointed as the Financial Adviser to the Company in relation to the Acquisition.

China Galaxy International Securities (Hong Kong) Co., Limited and Octal Capital Limited have been appointed as the Joint Sponsors to the new [REDACTED]ofthe Company. Octal Capital Limited, one of the Joint Sponsors, satisfies the independence criteria applicable to sponsors as set out in Rule 3A.07 of the Listing Rules.

–12– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

The Independent Board Committee comprising all independent non-executive Directors, namely Mr. Chan Yuk Tong, Mr. Mei Jianping and Mr. Wei Lidong has been established to advise the Independent Shareholders in relation to, among others, the Acquisition.

Quam Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in relation to, among others, the Acquisition.

TOTAL EXPENSES

The aggregate fees, together with the Stock Exchange [REDACTED], legal and other professional fees, printing and other expenses relating to the Acquisition, are estimated to be approximately HK$[REDACTED] million and are payable by the Company. Shareholders should note that such expenses are the latest practicable estimate for the purpose of this circular and the final actual amount may differ from the aforementioned estimate. Upon Completion, such expenses are expected to be charged to the consolidated income statement of the Company. The Directors do not expect these expenses to have a material impact on the results of operations of the Company in the year ending 31 March 2016.

DIVIDEND POLICY

During the Track Record Period, the Company did not declare or pay any dividend, which may not reflect the future intention of the Company to declare dividends. In respect of the Target Group, a dividend of RMB145,000,000 declared by Ground Real Estate has been approved by the equity holders on 25 March 2015. A dividend of RMB198,000,000 declared by Jilin Ground Real Estate, a member of Ground Real Estate Group had been approved by the equity holders on 25 March 2015 of which RMB35,640,000 were attributable to its non-controlling equity holders.

The Company currently does not have a fixed dividend policy. The Board has the discretion to determine whether to recommend any dividend for any period and, if the Board decides to recommend a dividend, the amount of dividend to be declared. Factors to be taken into account by the Board when determining whether to recommend declaration of a dividend in the future include the financial conditions of the Enlarged Group, its earnings, cash flow and capital requirements and any other factors the Board considers relevant. The Company will evaluate its dividend policy from time to time in light of its financial position and prevailing economic climate. There is no guarantee that dividends will be paid in the future.

–13– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. SUMMARY

RECOMMENDATIONS AND THE PROPOSED SGM

The Independent Board Committee, having considered the terms and conditions of the Sale and Purchase Agreement and after taking into account the advice from the Independent Financial Adviser, considers that the terms of the Acquisition are fair and reasonable and in the interests of the Company and the Shareholders as a whole. The Independent Board Committee accordingly recommends that the Independent Shareholders vote in favour of the resolutions to be proposed at the SGM to approve, among other matters, the Acquisition. The Directors recommend that the Shareholders vote in favour of the resolutions to be proposed to approve, among other matters, the Acquisition as well as other resolutions to be proposed at the SGM.

The text of the letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages [80] to [81] of this circular.

The text of the letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders with regard to, among others, the Acquisition and the principal factors and reasons which it has taken into account in arriving at its advice, is set out on pages [82] to [121] of this circular.

The SGM is proposed to be held at [●]. on [●]-day, [●] 2016, at which the relevant resolutions in connection with the Acquisition, the increase in the authorised share capital of the Company and the amendment of the Bye-laws will be proposed for approval by the Shareholders. A notice of the SGM is set out on pages SGM-1 to SGM-4 of this circular and a form of proxy for use at the SGM is enclosed for further action of the Shareholders. Please refer to further details of the SGM set out in the section headed “Letter from the Board – SGM” on page [77] of this circular.

ACQUISITION BY THE GROUP OF THE ENTIRE EQUITY INTEREST IN JILIN WAN SHENG PROPERTY DEVELOPMENT COMPANY LIMITED

As announced by the Company on 11 September 2015 and 8 October 2015 and as further detailed in the circular issued by the Company on 28 December 2015, a wholly-owned subsidiary of the Company entered into the respective agreements to acquire the entire equity interest in Wan Sheng, which constitutes a major transaction for the Company under the Listing Rules. The Company [will] convene a special general meeting on 18 January 2016 to consider the proposed acquisition of Wan Sheng. Upon completion of such proposed acquisition, Wan Sheng will become a subsidiary of the Company and its financial results will be consolidated into those of the Company. For ease of reference of the Shareholders, certain information relating to Wan Sheng is set out in this circular and please refer to Appendix IIIB, Appendix IV and Appendix VIC to this circular.

–14– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

In this circular, unless the context requires otherwise, the following expressions have the following meanings when used herein:

“Acquisition” the acquisition of the [REDACTED] by the Purchaser from the Vendor pursuant to the Sale and Purchase Agreement

“acting in concert” has the meaning ascribed to it under the Takeovers Code

“associate(s)” has the meaning ascribed to it under the Listing Rules

“Baishan Ground Business 白山市廣澤商業管理有限公司 (Baishan Ground Business Management” Management Company Limited*), a limited liability company established on 25 December 2012 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Baishan Ground Property 白山市廣澤物業服務有限公司 (Baishan Ground Property Services” Services Company Limited*), a limited liability company established on 24 June 2013 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Baishan Ground Real Estate” 白山市廣澤房地產開發有限公司 (Baishan Ground Real Estate Development Company Limited*), a limited liability company established on 8 August 2011 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Board” the board of Directors

“Business Day” a day (other than a Saturday, a Sunday or a public holiday) on which banks in Hong Kong are generally open for business

“BVI” the British Virgin Islands

“Bye-laws” the bye-laws of the Company

“CB Conversion Price” the initial conversion price of HK$0.85 per CB Conversion Share upon the exercise of the conversion rights attaching to the Convertible Bonds

–15– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“CB Conversion Shares” the [REDACTED] to be allotted and issued to holders of the Convertible Bonds by the Company upon exercise of the conversion rights attaching to the Convertible Bonds and each a “CB Conversion Share”

“CCASS” the Central Clearing and Settlement System established and operated by HKSCC

“Changchun Dongxiu” 長春市東秀投資有限公司 (Changchun Dongxiu Investment Company Limited*), a limited liability company established on 4 November 2010 in the PRC which is beneficially and wholly-owned by Ms. Chai and one of the shareholders of Ground Real Estate prior to completion of the Reorganisation

“Changchun Zhujia” 長春市築家房地產開發有限公司 (Changchun Zhujia Real Estate Development Company Limited*), a limited liability company established on 7 December 2010 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Charm Success” Charm Success Group Limited, a company incorporated in the BVI with limited liability on 28 September 2012 which is beneficially and wholly-owned by Ms. Cui and is a controlling Shareholder of the Company

“Civil Air Defence Law” Civil Air Defence Law of the PRC《中華人民共和國人 ( 民防空法》)

“close associate(s)” has the meaning as defined in the Listing Rules

“Company”, “the Company” or Ground Properties Company Limited (廣澤地產有限公 “our Company” 司), a company incorporated in Bermuda with limited liability on 11 January 1994, the issued Shares of which are listed on the Main Board of the Stock Exchange (stock code: 989)

“Companies Act” the Companies Act 1981 of Bermuda, as amended, supplemented or otherwise modified from time to time

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) effective from 3 March 2014, as amended, supplemented or otherwise modified from time to time

–16– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Completion” completion of the Acquisition in accordance with the Sale and Purchase Agreement

“Completion Date” the date on which Completion occurs, being the second Business Day after the fulfilment (or waiver, as the case may be) of the conditions precedent to the Acquisition, or such other date as the Vendor and the Purchaser may agree in writing

“Confirmatory Deed” the gift and confirmatory deed dated 10 December 2014 entered into among Ms. Cui, Jilin Dongxiu, Changchun Dongxiu, Ground Investment Holding, Mr. Cui and Ms. Chai in relation to the transfer of the entire equity interest in Ground Real Estate from Mr. Cui and Ms. Chai to Ms. Cui by way of gift and the nominee arrangement effective from 1 January 2014

“connected person(s)” has the meaning as defined in the Listing Rules and the word “connected” shall be construed accordingly

“Consideration” the aggregate consideration of HK$4,650,000,000 for the sale and purchase of the [REDACTED] under the Sale and Purchase Agreement

“Consideration Shares” an aggregate of [REDACTED]tobeallottedand issued by the Company to the Vendor at the Issue Price at Completion pursuant to the Sale and Purchase Agreement

“controlling Shareholder(s)” has the meaning as defined under the Listing Rules and in the context of the Company, means Charm Success and Ms. Cui

“Conversion Shares” together, the CB Conversion Shares and the CPS Conversion Shares

“Convertible Bonds” the convertible bonds in the aggregate principal amount of HK$500,000,000 at the interest rate of 2% for a term of 5 years from the date of issue, and with the CB Conversion Price (being [REDACTED]) per CB Conversion Share (subject to adjustment), to be issued by the Company as part of the Consideration

–17– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Convertible Preference Shares” the [REDACTED] new non-redeemable convertible or “CPS” preference shares of nominal value of HK$0.05 each with notional value of [REDACTED] each and CPS Conversion Price (being initially [REDACTED], subject to adjustment) to be created as a new class of shares in the share capital of the Company and to be allotted and issued by the Company as part of the Consideration upon Completion

“core connected person(s)” has the meaning as defined in the Listing Rules

“CPS Conversion Price” the initial conversion price of HK$[REDACTED]in relation to the Convertible Preference Shares

“CPS Conversion Shares” the [REDACTED] to be allotted and issued to holders of the Convertible Preference Shares by the Company upon exercise of the conversion rights attaching to the Convertible Preference Shares

“CSRC” the China Securities Regulatory Commission (中國證券監督管理委員會)

“Deed of Non-Competition” the deed of non-competition to be executed by the controlling Shareholders in favour of the Company (for itself and as trustee for its subsidiaries) as further described in the section headed “Relationship with controlling Shareholders” of this circular

“Director(s)” the director(s) of the Company

“EIT Law” the PRC Enterprise Income Tax Law (中華人民共和國企業所得稅法) promulgated on 16 March 2007 and its implementation rules promulgated on 6 December 2007, both effective from 1 January 2008

“Enlarged Group” the Group as enlarged by the companies which will become subsidiaries by reason of acquisitions which has been agreed or proposed since 31 March 2015, being the date to which the latest audited accounts of the Company have been made up, including members of the Target Group and Wan Sheng upon Completion

“Financial Adviser” China Galaxy International Securities (Hong Kong) Co., Limited, a corporation licensed to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, being the financial adviser to the Company in relation to the Acquisition

–18– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Fusong Changbaishan” 撫松長白山廣澤旅遊開發有限公司 (Fusong Changbaishan Ground Tourism Development Company Limited*), a limited liability company established on 21 December 2011 in the PRC, a direct wholly-owned subsidiary of Jilin Ground Tourism Investment and a member of the Target Group

“Fusong Ground” 撫松廣澤房地產開發有限公司 (Fusong Ground Real Estate Development Company Limited*), a limited liability company established on 6 July 2012 in the PRC, an indirect wholly-owned subsidiary of Jilin Ground Tourism Investment and a member of the Target Group

“Fusong Guosong Conference” 撫松果松會務服務有限公司 (Fusong Guosong Conference Services Company Limited*), a limited liability company established on 26 October 2012 in the PRC, an indirect wholly-owned subsidiary of Jilin Ground Tourism Investment and a member of the Target Group

“Fusong Guosong Specialty” 撫松果松特產有限公司 (Fusong Guosong Specialty Company Limited*), a limited liability company established on 26 October 2012 in the PRC, an indirect wholly-owned subsidiary of Jilin Ground Tourism Investment and a member of the Target Group

“Ground Investment Holding” 廣澤投資控股集團有限公司 (Ground Investment Holding (Group) Limited*), a limited liability company established on 16 November 2010 in the PRC which is owned as to 41.67% by Jilin Dongxiu, as to 13.89% by Chengchun Dongxiu, as to 14.22% by Ms. Zhou Shuqin and as to 30.22% by Ms. Wang Shuwen and was one of the shareholders of Ground Real Estate prior to completion of the Reorganisation

“Ground Real Estate” 廣澤地產集團股份有限公司 (Ground Real Estate Group Company Ltd.*), a joint stock limited liability company established in the PRC on 26 November 2010 and an indirect wholly-owned subsidiary of the Target Company

“Ground Real Estate Group” Ground Real Estate and its subsidiaries

“Group” the Company and its subsidiaries

–19– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Group’s Interests” the 35% interests already held by the Group in吉林省廣澤旅遊開發有限公司 (Jilin Ground Tourism Investment Co., Ltd.*) and its subsidiaries, being a sub-group of the Target Group holding the property project Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村), which in turn forms part of the Target Properties

“HK$” or “HKD” Hong Kong dollars, the lawful currency of Hong Kong

“HKSCC” Hong Kong Securities Clearing Company Limited, a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited

“HKFRSs” Hong Kong Financial Reporting Standards

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Independent Board the independent committee of the Board, comprising Committee” all the independent non-executive Directors, namely Mr. Chan Yuk Tong, Mr. Mei Jianping and Mr. Wei Lidong established to advise the Independent Shareholders in relation to, among others, the Acquisition

“Independent Financial Quam Capital Limited, a corporation licensed to Adviser” conduct Type 6 (advising on corporate finance) regulated activity under the SFO, being the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition

“Independent Shareholders” the Shareholders, excluding those who are required to abstain from voting at the SGM to be convened in accordance with the Listing Rules and other applicable laws, rules and regulations

“Independent Third Party” a party who is not a connected person (within the meaning of the Listing Rules) of the Company, its subsidiaries or any member of the Target Group

“Initial Agreement” the sale and purchase agreement dated 26 May 2015 entered into among the Purchaser, the Vendor and Ms. Cui

–20– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Issue Price” the issue price of HK$0.85 per Consideration Share

“Jilin Dongxiu” 吉林省東秀投資有限公司 (Jilin Dongxiu Investment Company Limited*), a limited liability company established on 4 November 2010 in the PRC which is beneficially and wholly-owned by Mr. Cui, one of the shareholders of Ground Real Estate prior to completion of the Reorganisation

“Jilin Ground Equity” 吉林省廣澤股權投資基金合夥企業（有限合夥） (Jilin Ground Equity Investment Fund Joint Venture (Limited Partnership)*), a limited partnership established on 8 March 2011 in the PRC partners of which consist of 吉林省長江股權投資基金管理有限公司, Shanxi Tian Jian Automobile, Zhi Wen Investment, 馬伯樂 and 任松 and which is one of the shareholders Jilin Zhujia and Baishan Ground Real Estate prior to completion of the Reorganisation

“Jilin Ground Hotel 吉林省廣澤酒店管理有限公司 (Jilin Ground Hotel Management” Management Company Limited*), a limited liability company established on 18 November 2014 in the PRC, an indirect wholly-owned subsidiary of Jilin Ground Tourism Investment and a member of the Target Group

“Jilin Ground Property 吉林省廣澤物業投資有限公司 (Jilin Ground Property Investment” Investment Company Limited*), a limited liability company established on 4 July 2012 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Ground Property 吉林市廣澤物業服務有限公司 (Jilin Ground Property Services” Services Company Limited*), a limited liability company established on 29 September 2010 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Ground Real Estate” 吉林省廣澤地產有限公司 (Jilin Ground Real Estate Company Limited*), a limited liability company established on 22 October 2009 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Ground Tourism 吉林省廣澤旅遊開發有限公司 (Jilin Ground Tourism Investment” Investment Co., Ltd*), a limited liability company established on 25 January 2013 in the PRC, a non wholly-owned subsidiary of the Target Company

–21– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“ Jilin Guangze Tourism 吉林省廣澤旅遊投資有限公司 (Jilin Guangze Tourism Investment” Investment Co., Ltd*), a limited liability company established on 21 January 2013 in the PRC which is ultimately beneficially owned by Ms. Cui and the shareholder of Jilin Zhujia prior to the Reorganisation

“Jilin Guangze Group” 吉林省廣澤集團有限公司 (Jilin Guangze Group Co., Ltd.*), a limited liability company established on 7 August 2002 in the PRC which is owned as to 95% by Mr. Cui and as to 5% by Mr. Liu Xiaodan

“Jilin Kegao” 吉林省科高房地產開發有限公司 (Jilin Kegao Real Estate Development Company Limited*), a limited liability company established on 4 January 2011 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Modern Construction” 吉林省當代建築節能建材經銷有限公司 (Jilin Modern Construction and Green Material Retail Limited*), a limited liability company established on 21 June 2012 in the PRC which is wholly owned by Ground Investment Holding and is the shareholder of Baishan Grand Business Management prior to the completion of the Reorganisation

“Jilin Rongli” 吉林省融利投資有限公司 (Jilin Rongli Investment Company Limited*), a limited liability company established on 29 December 2014 in PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Rongyu” 吉林省融裕投資有限公司 (Jilin Rongyu Investment Company Limited*), a limited liability company established on 29 December 2014 in PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Xinrui” Jilin Province Xinrui Enterprise Management Consultation Co., Limited (吉林省鑫銳企業管理咨詢有限公司), a limited liability company established on 16 December 2014 in PRC, an indirect wholly-owned subsidiary of the Target Company

“Jilin Zhujia” 吉林市築家房地產開發有限公司 (Jilin Zhujia Real Estate Development Company Limited*), a limited liability company established on 28 February 2011 in the PRC, an indirect wholly-owned subsidiary of the Target Company

–22– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Joint Sponsors” (1) China Galaxy International Securities (Hong Kong) Co., Limited, a corporation licensed to conduct Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) regulated activities under the SFO, and (2) Octal Capital Limited, a corporation licensed to conduct Type 1 (dealing in securities) and Type 6 (advising on corporation finance) regulated activities under the SFO, both being the joint sponsors to the new listing application of the Company

“Last Trading Day” 22 May 2015, being the last trading day for the Shares before the date of the announcement of the Company dated 3 July 2015

“LAT” Land Appreciation Tax as defined in the Provisional Regulations of the PRC on Land Appreciation Tax《中華 ( 人民共和國土地增值稅暫行條例》) and the Detailed Implementation Rules on the Provisional Regulations of the PRC on Land Appreciation Tax《中華人民共和國土地 ( 增值稅行條例實施細則》)

“Latest Practicable Date” 22 December 2015, being the latest practicable date prior to the date of this circular for the purpose of ascertaining certain information contained in this circular

[REDACTED][REDACTED]

“Listing Committee” the Listing Committee of the Stock Exchange

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

“Main Board” the stock market (excluding the option markets) operated by the Stock Exchange which is independent from and operated in parallel with the Growth Enterprise Market of the Stock Exchange

“Market Research Report” a commissioned research report from Ernst & Young (China) Advisory Limited, an independent market consultant, for use in part in this circular to provide the Shareholders with information relating to the economy of the PRC, the property market in Jilin Province of the PRC and the industry in which the Target Group operates. See Appendix I to this circular

–23– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Memorandum” the memorandum of association of the Company, as may be amended from time to time

“MLR” the Ministry of Land and Resources of the PRC (中華人民共和國國土資源部)

“MOFCOM” the Ministry of Commerce of the PRC (中華人民共和國商務部), or its predecessor, the Ministry of Foreign Trade and Economic Cooperation of the PRC (中華人民共和國對外貿易經濟合作部), as appropriate to the context

“MOHURD” the Ministry of Housing and Urban-Rural Development of the PRC (中華人民共和國住房和城鄉建設部)

“Mr. Cui” Mr. Cui Mindong (崔民東), the spouse of Ms. Chai and the father of Ms. Cui

“Ms. Chai” Ms. Chai Xiu (柴琇), an executive Director and the chairperson of the Board, the spouse of Mr. Cui and the mother of Ms. Cui

“Ms. Cui” Ms. Cui Xintong (崔薪瞳), a controlling Shareholder and a member of the senior management of the Company and the daughter of Ms. Chai and Mr. Cui

“NDRC” the National Development and Reform Commission of the PRC (中華人民共和國國家發展和改革委員會)

“PBOC” The People’s Bank of China (中國人民銀行), the central bank of China

“percentage ratios” has meaning ascribed to it in the Listing Rules

“Post-Signing Accounts” the unaudited consolidated balance sheet of 廣澤地產集團股份有限公司(Ground Real Estate Group Company Limited*) and its subsidiaries as at 31 October 2015, being the valuation date of the valuation report set out in Appendix VIB to this circular, and the profit and loss accounts of 廣澤地產集團股份有限公司(Ground Real Estate Group Company Limited*) and its subsidiaries for the period between 1 May 2015 and 31 October 2015, being the valuation date of the valuation report set out in Appendix VIB to this circular, prepared in accordance with the accounting principles generally accepted in the PRC

–24– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“PRC” or “China” the People’s Republic of China, which shall, for the purposes of this circular, exclude Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

“PRC government” or “Chinese the central government of the PRC, including all government” governmental subdivisions (including provincial, municipal and other regional or local government entities)

“Purchaser” Frontier Power Investments Limited, a company incorporated in the BVI with limited liability on 6 February 2013 and a wholly-owned subsidiary of the Company

“Reorganisation” the reorganisation of the Target Group in preparation for the Listing, details of which are set out in the section headed “History and Reorganisation of the Target Group — Reorganisation Plan of the Target Group” in this circular

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

“SAFE” the State Administration of Foreign Exchange of the PRC (中華人民共和國國家外匯管理局)

“SAIC” the State Administration for Industry and Commerce of the PRC (中華人民共和國國家工商行政管理總局)

“Sale and Purchase Agreement” the Initial Agreement as amended and supplemented by the Supplemental Agreement and the Second Supplemental Agreement

[REDACTED][REDACTED]

“SASAC” the State-owned Assets Supervision and Administration Commission of People’s Government of Beijing Municipality (北京市人民政府國有資產監督管理委員會)

“SAT” the State Administration of Taxation of the PRC (中華人民共和國國家稅務總局)

–25– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Savills” Savills Valuation and Professional Services Limited, an independent property valuer appointed by the Company

“Second Supplemental the second supplemental sale and purchase Agreement” agreement dated 22 December 2015 entered into among the Vendor, the Purchaser and Ms. Cui

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“SGM” the special general meeting of the Company to be convened for the purpose of considering, and if thought fit, approving, among others, (i) the Sale and Purchase Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares and the Conversion Shares, as well as the issue of the Convertible Bonds and the Convertible Preference Shares; (ii) the increase in the authorised share capital of the Company; and (iii) the amendment of Bye-laws

“Shanxi Tian Jian Automobile” 山西天健汽車集團有限公司 (Shanxi Tian Jian Automobile Group Limited*), a limited liability company established on 21 October 2005 in the PRC which is owned as to 99.35% by Mr. He Yingkui and as to 0.65% by Ms. Zhang Xuemei and is one of the shareholders of Jilin Ground Real Estate prior to the completion of the Reorganisation

“Share(s)” ordinary share(s) of HK$0.05 each in the share capital of the Company

“Shareholder(s)” the holder(s) of the Share(s)

“State Council” the State Council of the PRC (中華人民共和國國務院)

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“Supplemental Agreement” the supplemental sale and purchase agreement dated 3 July 2015 entered into among the Vendor, the Purchaser and Ms. Cui

“Takeovers Code” the Hong Kong Code on Takeovers and Mergers

–26– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Target Company” or “Ka Yun” Ka Yun Investments Limited (家潤投資有限公司), a company incorporated in the BVI with limited liability on 4 April 2014 which is wholly-owned by the Vendor as at the Latest Practicable Date

“Target Group” the Target Company and its subsidiaries, and each of them, a “Target Group Company”, where the context requires, in respect of the period before the Target Company (either directly or indirectly) became the holding company of any of its subsidiaries, such subsidiaries are treated as if they were subsidiaries of the Target Company at the relevant time

“Target Properties” the land and property assets attributable to the Target Group

“Track Record Period” the period comprising the three years ended 31 December 2014 and the eight months ended 31 August 2015

“US$” or “USD” United States Dollars, the lawful currency of the United States of America

“Vendor” or “Ka Yik” Ka Yik Investments Limited (家譯投資有限公司), a company incorporated in the BVI with limited liability on 4 April 2014 which is ultimately beneficially wholly-owned by Ms. Cui and a connected person to the Company

“Wan Sheng” Jilin Wan Sheng Property Development Company Limited* (吉林市萬升房地產開發有限公司), a company established under the laws of the PRC with limited liability on 19 November 2009 which is owned as to 49% by Ms. Cui Guiying and as to 51% by Ms. Wang Dongwei and will be a wholly owned subsidiary of the Company after the completion of the acquisition of Wan Sheng by the Group

“Xin Rui” Xin Rui Investments Limited (鑫銳投資有限公司), a company incorporated in Hong Kong with limited liability on 7 April 2014 and a direct wholly-owned subsidiary of the Target Company

–27– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DEFINITIONS

“Yanji Huize” 延吉市惠澤房地產開發有限公司 (Yanji Huize Real Estate Development Company Limited*), a limited liability company established on 24 May 2012 in the PRC, an indirect wholly-owned subsidiary of the Target Company

“Zhi Wen Investment” 智文投資（北京）有限公司 (Zhi Wen Investment (Beijing) Limited*), a limited liability company established on 9 November 2010 in the PRC which is owned as to 90% by Mr. Wang Shouwen and as to 10% by Ms. Dan Guoling and is one of the shareholders of Jilin Ground Real Estate prior to the completion of the Reorganisation

“%” per cent

For the purpose of this circular, unless the context otherwise requires or expressly specified, conversion of Renminbi into Hong Kong dollars is based on the approximate exchange rate of RMB1.00 to HKD1.20. Such exchange rate is for the purpose of illustration only and does not constitute a representation that any amounts in Hong Kong dollars or Renminbi have been, could have been or may be converted at such or any other rate or at all.

Certain amounts and percentage figures set out in this circular have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables and the currency conversion or percentage equivalents may not be an arithmetic sum of such figures.

The percentage shareholding of the Shareholders in the Company upon Completion represent the number of Shares held by them as a percentage of the total number of issued Shares immediately upon Completion, unless otherwise stated.

The English names of the Chinese companies, entities, departments, facilities, certificates, titles and the like marked with “*” are translations of their Chinese names and are included in this circular for identification purpose only, and should not be regarded as their official English translation. In the event of any inconsistency, the Chinese name prevails.

–28– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

The glossary contains explanations and definitions of certain terms used in this circular in connection with the Target Group and their respective businesses. The terms and their meanings may not correspond to standard industry meanings or usage of these terms.

“ASP” average selling price(s)

“building ownership certificate” building ownership certificate (房屋所有權證) or other names as the case may be, a certificate, record or filing issued by the relevant PRC governmental authority responsible for real estate and land resources with respect to building ownership

“CAGR” compound annual growth rate

“commercial” a general term used to describe non-residential developments such as, but not limited to, offices, shopping malls, retail developments, hotels and serviced apartments. The terms “commercial properties” and “commercial projects” shall be construed accordingly

“completion certificate” completion and acceptance certificate (竣工工程備案證) issued by local construction committees or relevant authorities in China

“completion filing” construction works completion inspection acceptance certificate or record issued by or filing with local urban construction authorities or equivalent authorities in China with respect to the completion of property projects (竣工驗收備案)

“construction land planning construction land planning permit (建設用地規劃許可 permit” 證) issued by local urban planning administration authorities or equivalent authorities in China

“construction work construction work commencement permit (建築工程 commencement permit” 施工許可證) issued by local construction committees or equivalent authorities in China

“construction work planning construction work planning permit (建設工程規劃許可 permit” 證) issued by local urban planning administration authorities or equivalent authorities in China

“development cost” land cost, construction cost and capitalised interest in relation to the development and construction of a property project

–29– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. GLOSSARY OF TECHNICAL TERMS

“GDP” gross domestic product

“GFA” gross floor area

“land use rights certificate” state-owned land use rights certificate (國有土地使用證), a certificate issued by the relevant PRC governmental authority responsible for real estate and land resources with respect to land use rights of a land parcel

“mu” mu (畝), a unit of area commonly used in the PRC. 1 mu equals to approximately 666.67 sq.m

“pre-sale permit” the Pre-sale Permit (商品房預售許可證) a permit issued by a local housing and building authority or bureau or an equivalent authority in China authorising a developer to commence the sale of property under construction

“public tender”, “auction”, or public tender, auction or listing at a land exchange “listing-for-sale” administered by the local government, each of which is a competitive bidding process through which a purchaser acquires land use rights directly from the PRC government

“real estate and land use rights certificate of real estate ownership (房地產權證)or certificate” real estate and land use rights certificate (土地房屋權證), a composite certificate issued by the relevant PRC governmental authority responsible for real estate and land resources with respect to land use rights of a land parcel and building ownership of the building(s) thereon

“sales permit” the sales permit (銷售許可證) authorising a developer to start the sale of property

“sq.m” square metre(s)

“total GFA” or the above-ground and underground saleable and/or “total gross floor area” leasable area contained within the external walls of any building at each floor level and the whole thickness of the external walls of the relevant project together with other non-leasable and non-saleable area as shown on the relevant building ownership certificates. In general, this includes mechanical and electrical services rooms, refuse rooms, water tanks, car parking floors, lifts and staircases

–30– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CORPORATE INFORMATION

Registered Office Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head office and principal Rooms 3505–3506, 35th Floor place of business Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

Company Secretary Ms. LUNG Yuet Kwan (龍月群) (ACCA, HKICPA) Rooms 3505–3506, 35th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

Audit Committee Mr. CHAN Yuk Tong (陳育棠) (Committee Chairperson) Mr. MEI Jianping (梅建平) Mr. WEI Lidong (尉立東)

Nomination Committee Mr. MEI Jianping (梅建平) (Committee Chairperson) Mr. CHAN Yuk Tong (陳育棠) Ms. CHAI Xiu (柴琇)

Remuneration Committee Mr. CHAN Yuk Tong (陳育棠) (Committee Chairperson) Mr. MEI Jianping (梅建平) Ms. CHAI Xiu (柴琇) Mr. WEI Lidong (尉立東)

Authorised Representatives Ms. Chai Xiu (柴琇) Building 34, Hong Cheng Bie Shu No. 88 East Nan Hu Road Chang Chun City Jilin Province PRC

Ms. LUNG Yuet Kwan (龍月群) (ACCA, HKICPA) Rooms 3505–3506, 35th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

–31– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. CORPORATE INFORMATION

Principal bankers Hang Seng Bank Limited 83 Des Voeux Road Central Hong Kong

The Hongkong and Shanghai Banking Corporation Limited 1 Queen’s Road Central Hong Kong

[REDACTED][REDACTED]

Company website http://www.groundproperties.com/ (the contents of the website do not form part of this circular)

–32– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED

The following sets out the current Directors, senior management and their positions in the Company. Please refer to the section headed “Directors and Senior Management of the Enlarged Group” for further details.

Name Address Nationality

Executive Directors

Ms. CHAI Xiu (柴琇) Building 34, Hong Cheng Bie Shu Chinese (Chairperson) No. 88 East Nan Hu Road Chang Chun City Jilin Province PRC

Mr. WANG Guanghui No. 1346 Kaiyun Street Chinese (王廣會) Chaoyang District Chang Chun City PRC

Mr. HUANG Bingxing Room 1302 Chinese (黃炳興) No. 12, Lane 80 Linfen Road Zha Bei District Shanghai City PRC

Independent non-executive Directors

Mr. CHAN Yuk Tong Flat A, 1/F, Block 2 Chinese (陳育棠) King’s Park Villa Homantin Kowloon Hong Kong

Mr. MEI Jianping 6 Bellingham Drive American (梅建平) Kendall Park NJ 08824-7018 The United States of America

Mr. WEI Lidong Room 2605, Building 1 Chinese (尉立東) No. 9 Nongzhan South Road Chaoyang District Beijing City PRC

–33– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED

Name Address

Senior Management

Mr. Chen Zhihao (陳志浩) Area A–B, 8th Floor No. 600 Heng Feng Road Zha Bei District Shanghai, City PRC

Ms. Zhang Lihong (張麗紅) 135 Hunjiang Dajie Hunjiang District Baishan Jilin Province PRC

Mr. Min Zhi (閔治) No. 8 Huangqi Road Chuanying District Jilin City Jilin Province PRC

Mr. Xu Yingchuan (徐映川) No. 5769, Changbaishanxi Road Yanji City Jilin Province PRC

Ms. Ji Ping (計平) Ground Building No. 4388 Xian Road Green Garden District Changchun City Jilin Province PRC

Ms. Cui Xintong (崔新瞳) Rooms 3505–3506, 35th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

Mr. Ng Man Kit Micky (伍文傑) Rooms 3505–3506, 35th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

Ms. Lung Yuet Kwan (龍月群) Rooms 3505–3506, 35th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

–34– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED

Joint Sponsors to the China Galaxy International Securities (Hong Kong) [REDACTED] application Co., Limited Unit 3501–3507 & 3513–3514, 35/F Cosco Tower 183 Queen’s Road Central Hong Kong

Octal Capital Limited 801–805, 8th Floor, Nan Fung Tower 88 Connaught Road Central Hong Kong

Financial Adviser to the China Galaxy International Securities (Hong Kong) Company in respect of the Co., Limited Acquisition Unit 3501–3507 & 3513–3514, 35/F Cosco Tower 183 Queen’s Road Central Hong Kong

Independent Financial Adviser Quam Capital Limited to the Independent Board 18th–19th Floors, China Building Committee and the 29 Queen’s Road Central Independent Shareholders Hong Kong

Legal advisers to the Company As to Hong Kong law: Michael Li & Co. 19/F, Prosperity Tower No. 39 Queen’s Road Central Central, Hong Kong

As to PRC law: Commerce & Finance Law Offices 6F NCI Tower, A12 Jianguomenwai Avenue, Beijing 100022 PRC

As to Bermuda law: Conyers Dill & Pearman 2901, One Exchange Square 8 Connaught Place Central Hong Kong

–35– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND PARTIES INVOLVED

Legal advisers to the Joint As to Hong Kong law: Sponsors K&L Gates 44/F, Edinburgh Tower The Landmark 15 Queen’s Road Central Hong Kong

As to PRC law: Zhong Lun Law Firm 9–10/F, Tower A, Rongchao Centre 6003 Yitian Road, Futian District Shenzhen PRC

Auditors and reporting Mazars CPA Limited accountants as to the Target Certified Public Accountants Group and the Enlarged 42/F, Central Plaza, 18 Harbour Road Group and as to the Group Wanchai, Hong Kong

Independent property valuer Savills Valuation and Professional Services Limited 23/F, Two Exchange Square Central, Hong Kong

Compliance adviser Octal Capital Limited 801–805, 8th Floor, Nan Fung Tower 88 Connaught Road Central Hong Kong

–36– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

GROUND PROPERTIES COMPANY LIMITED 廣澤地產有限公司 (Incorporated in Bermuda with limited liability) (Stock Code: 989)

Executive Directors: Registered office: Ms. CHAI Xiu (柴琇) (Chairperson) Clarendon House Mr. WANG Guanghui (王廣會) 2 Church Street Mr. HUANG Bingxing (黃炳興) Hamilton HM 11 Bermuda Independent non-executive Directors: Mr. CHAN Yuk Tong (陳育棠) Principal place of business in Hong Kong: Mr. MEI Jianping (梅建平) Rooms 3505–3506, 35th Floor Mr. WEI Lidong (尉立東) Edinburgh Tower, The Landmark 15 Queen’s Road Central Central Hong Kong

[●] 2016

To the Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL ACQUISITION (2) CONNECTED TRANSACTION (3) REVERSE TAKEOVER INVOLVING A NEW LISTING (4) ISSUE OF CONVERTIBLE BONDS AND CONVERTIBLE PREFERENCE SHARES, AND ISSUE OF SHARES UNDER SPECIFIC MANDATE (5) INCREASE IN AUTHORISED SHARE CAPITAL AND (6) AMENDMENT OF BYE-LAWS

INTRODUCTION

It was first announced on 19 March 2015 that the Company was considering the feasibility of an acquisition of equity interest in a BVI company, which together with its subsidiaries, is principally engaged in the property development business in China. It was subsequently announced on 26 May 2015, 3 July 2015 and 22 December 2015 that Frontier Power Investments Limited (as the Purchaser), a wholly-owned subsidiary of the Company, Ka Yik Investments Limited (as the Vendor) and Ms. Cui (as the Vendor’s guarantor) entered into the Initial Agreement, the Supplemental Agreement and the Second Supplemental Agreement (together, the Sale and Purchase Agreement)

–37– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD respectively, pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell the entire issued share capital of the Target Company (being the Sale Shares) on the terms and subject to the conditions set out in the Sale and Purchase Agreement at the Consideration of HK$4,650,000,000, which shall be satisfied partly (i) by allotment and issue of Consideration Shares by the Company; (ii) by allotment and issue of Convertible Preference Shares by the Company; and (iii) by issue of Convertible Bonds by the Company. The total number of Consideration Shares and the Conversion Shares represent approximately 637.3% of the issued share capital of the Company as at the Latest Practicable Date and approximately 86.4% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares and the Conversion Shares.

The Target Company, namely Ka Yun Investments Limited, is a company incorporated in the BVI with limited liability and ultimately beneficially wholly-owned by Ms. Cui, who is a controlling Shareholder and daughter of Ms. Chai, who in turn is an executive Director and the chairperson of the Board. Upon Completion, the Purchaser will become the sole shareholder of the Target Company which will in turn become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the financial statements of the Group. The Target Company, together with its subsidiaries as the Target Group, is principally engaged in the development, sale and leasing of residential, commercial and tourism properties and property management in the PRC. Please refer to the paragraph headed “Information on the Target Group” in this section and the section headed “Business of the Target Group” in this circular for further details of the Target Group, its property portfolio and businesses.

The Acquisition is conditional upon satisfaction of the conditions precedent as set out under the sub-paragraph headed “Conditions precedent” of the paragraph headed “The Acquisition” in this section. One of the conditions precedent to the Acquisition is that the aggregate amount of (i) the aggregate value of the Target Properties as shown in the valuation report set out in Appendix VIB to this circular; and (ii) the amount of recognised sale of the Target Properties as set out in the Post-Signing Accounts should not be less than the Target Value (being RMB7,720,500,000).

The Acquisition constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules as the applicable percentage ratios are over 100%. The Acquisition also constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules as the Vendor is a connected person of the Company by virtue of it being ultimately beneficially wholly-owned by Ms. Cui (a controlling Shareholder), whereby the applicable percentage ratios are over 100%. Accordingly, the Acquisition is subject to the approval of the Independent Shareholders at the SGM. At the board meeting approving the Acquisition on 26 June 2015, Ms. Chai, being mother of Ms. Cui and an executive Director and the chairperson of the Board, has not been counted as quorum and has abstained from voting in relation thereto.

In addition, the Acquisition constitutes a reverse takeover of the Company under Rule 14.06(6)(b) of the Listing Rules on the basis that the Acquisition (a) constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules; and (b) it involves acquisition of assets from the Vendor (which is an associate of Charm Success, a

–38– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD controlling Shareholder) pursuant to the Sale and Purchase Agreement of which the Initial Agreement and the Supplemental Agreement were entered into within 24 months after Charm Success having gained control (as defined in the Takeovers Code) of the Company. Accordingly, under Rule 14.54 of the Listing Rules, the Company is being treated as if it were a new [REDACTED]. The Acquisition is therefore subject to the approval of the Independent Shareholders as well as the approval of the Listing Committee of a new [REDACTED] made by the Company. Such new [REDACTED] of the Company is required to comply with all the requirements under the Listing Rules, in particular the requirements under Chapters 8 and 9 of the Listing Rules.

China Galaxy International Securities (Hong Kong) Co., Limited and Octal Capital Limited, as the Joint Sponsors, submitted to the Stock Exchange a listing application on behalf of the Company on 31 December 2015. The Listing Committee [has given] its approval in principle of the new [REDACTED] of the Company.

In connection with the Acquisition, the Board proposes to increase the Company’s authorised share capital from HK$780,000,000 divided into [REDACTED] Shares of HK$[REDACTED] each to HK$1,006,967,647.05 divided into [REDACTED] Shares of HK$[REDACTED] each and [REDACTED] Convertible Preference Shares of HK$[REDACTED] each by the creation of 4,539,352,941 Convertible Preference Shares. The proposed increase in the authorised share capital of the Company is conditional upon the passing of an ordinary resolution by the Shareholders at the SGM.

In order to facilitate the issue of the Convertible Preference Shares on the terms thereof, it is proposed that the Bye-laws be amended. The proposed amendment of Bye-laws is conditional upon the passing of a special resolution by the Shareholders at the SGM.

The SGM will be convened to be held to consider, and if thought fit, pass the relevant resolutions approving (i) the Sale and Purchase Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares, the Conversion Shares and the Convertible Preference Shares, the CPS Conversion Shares, as well as the issue of the Convertible Bonds; (ii) the increase in the authorised share capital of the Company; and (iii) the amendment of the Bye-laws. Charm Success and its close associates and any person who has a material interest in the Acquisition are required to abstain from voting on the relevant resolutions to be proposed at the SGM.

The purpose of this circular is to provide the Shareholders with details of:

(a) the Acquisition;

(b) the issue of the Convertible Bonds, the Convertible Preference Shares, the Conversion Shares and the Consideration Shares;

(d) the proposed amendment of Bye-laws;

(e) the business of the Target Group;

–39– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

(f) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in relation to, among others, the Acquisition;

(g) the financial information of the Group, the Target Group and the Enlarged Group;

(h) the valuation of properties of the Enlarged Group; and

(i) additional information on the Target Group and the Enlarged Group as required under the Listing Rules in connection with the new [REDACTED]by the Company.

The notice of the SGM to the Shareholders is also enclosed with this circular.

THE ACQUISITION

Sale and Purchase Agreement (being the Initial Agreement as amended and supplemented by the Supplemental Agreement and the Second Supplemental Agreement)

Date of Initial Agreement : 26 May 2015

Dates of Supplemental Agreement : 3 July 2015 and 22 December 2015 and Second Supplemental respectively Agreement

Parties to the Initial Agreement, the Supplemental Agreement and the Second Supplemental Agreement:

Purchaser : the Purchaser (being Frontier Power Investments Limited), a wholly-owned subsidiary of the Company

Vendor : the Vendor (being Ka Yik Investments Limited)

Vendor’s guarantor : Ms. Cui

The Vendor is a company ultimately beneficially wholly-owned by Ms. Cui who is the controlling Shareholder and daughter of Ms. Chai, who in turn is an executive Director and the chairperson of the Board. According to the Vendor, it is principally engaged in investment holding.

Assets to be acquired

The Sale Shares, being the entire issued share capital of the Target Company.

As at the Latest Practicable Date, the Group is interested in 35% of the registered capital of Jilin Ground Tourism Investment, and its subsidiaries, being a sub-group of the Target Group holding the property project, namely Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村), which in turn forms part of the Target Properties (as referred to in this section as the “Group’s Interests”). Please refer to the shareholding structure of the Target Group on page [173] of this circular, based on the information provided by the Vendor.

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Consideration

The Consideration, being HK$4,650,000,000, is payable to the Vendor at Completion and is to be satisfied in the following manner:

(i) as to HK$500,000,000 by way of issue of the Convertible Bonds to the Vendor upon Completion;

(ii) as to HK$3,858,450,000 by way of allotment and issue of the Convertible Preference Shares at the price of HK$0.85 per Convertible Preference Share to the Vendor upon Completion; and

(iii) as to HK$291,550,000 by way of allotment and issue of the Consideration Shares at the Issue Price (being HK$0.85 per Consideration Share) to the Vendor upon Completion.

The split between Convertible Preference Shares and Convertible Bonds was determined after arm’s length negotiations between the Group and the Vendor after taking into account the preference of the Vendor for the non-cash part of the Consideration to be settled by the Convertible Bonds. However, after considering the ability of the Group to service the interest payment of the Convertible Bonds, and the relatively lower amount of fixed dividend entitlement of the Convertible Preference Shares, which in turn would preserve its capital for future development of the Enlarged Group and reduce the potential impact on cashflow of the Enlarged Group should the Convertible Bonds be redeemed, the Group and the Vendor agreed to settle part of the Consideration by the issuance of the Convertible Preference Shares.

As announced by the Company on 3 July 2015, the Consideration was arrived at after arm’s length negotiations between the Group and the Vendor after taking into account the unaudited consolidated adjusted net asset value of Ground Real Estate (廣澤地產集團股份有限公司) and its subsidiaries (all being PRC entities of the Target Group) of approximately RMB3,720 million (equivalent to approximately HK$4,650 million), calculated as follows:

(i) the unaudited consolidated net asset value of Ground Real Estate and its subsidiaries attributable to the equity shareholders of Ground Real Estate as at 30 April 2015 of approximately RMB243 million (equivalent to approximately HK$304 million), prepared in accordance with the accounting principles generally accepted in the PRC;

(ii) plus

(a) the appreciation of the Target Properties (being land and properties attributable to the Target Group) in the amount of approximately RMB4,594 million (equivalent to approximately HK$5,743 million), which is equivalent to the difference between (1) the book value of the Target Properties (after deducting the Group’s Interests) as at 30 April 2015 in the amount of RMB1,968 million (equivalent to approximately

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HK$2,460 million) and (2) RMB6,562 million (equivalent to approximately HK$8,203 million).

To determine the appreciation of the Target Properties as above, the two factors below have been taken into account:

(A) the minimum amount (being RMB7,720.5 million (equivalent to approximately HK$9,650.6 million) (the “Target Value”)) required to be obtained pursuant to condition (v) in the sub-paragraph headed “Conditions precedent” below, being (a) the aggregate value of the Target Properties as shown in the valuation report set out in Appendix VIB to this circular; and (b) the amount of recognised sale of the Target Properties as set out in the Post-Signing Accounts (being the unaudited consolidated balance sheet of Ground Real Estate and its subsidiaries as at the valuation date of the valuation report set out in Appendix VIB to this circular, and the profit and loss accounts of Ground Real Estate and its subsidiaries for the period between 1 May 2015 and the valuation date of the valuation report set out in this circular, prepared in accordance with the accounting principles generally accepted in the PRC);

And adjusted by (B) RMB1,158.5 million (equivalent to approximately HK$1,448.1 million), being the portion of the Target Value attributable to the Group’s Interests;

(b) the injection of paid-up capital in Ground Real Estate (a member of the Target Group) of RMB100 million (equivalent to approximately HK$125 million) by its nominee shareholder on behalf of Ms. Cui subsequent to 30 April 2015;

(iii) less

(a) the estimated amount of business tax, land appreciation tax and income tax of approximately RMB911 million (equivalent to approximately HK$1,139 million) that will be payable upon the sale of the Target Properties (excluding the Group’s Interests) in the event the Target Value (excluding the Group’s Interests) is to be reached, which has been arrived at based on the prevailing applicable tax rates in the PRC. Given that such amount of estimated tax that will be payable in the event that the Target Properties were sold at the Target Value were not taken into account when the Target Value was estimated, the Directors therefore consider it to be prudent to deduct such amount of estimated tax in arriving at the Consideration; and

(b) the estimated development and construction costs of approximately RMB306 million (equivalent to approximately HK$383 million) that is expected to be incurred for the Target Properties (excluding the Group’s Interests) after 30 April 2015 in order to arrive at the Target Value (excluding the Group’s Interests).

–42– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

One of the conditions precedent to the Acquisition is that the aggregate amount of (a) the aggregate value of the Target Properties as shown in the valuation report set out in Appendix VIB to this circular; and (b) the amount of recognised sale of the Target Properties as set out in the Post-Signing Accounts shall be no less than the Target Value (being RMB7,720,500,000).

As at the Latest Practicable Date, certain Target Properties had yet been granted the land use right certificate* (土地使用權證), construction land planning permit* (建設用地規劃許可證), construction work planning permit* (建設工程規劃許可證), construction work commencement permit* (建築工程施工許可證) and/or construction works completion inspection certificate* (竣工工程備案證) – please refer to the property portfolio of the Target Group as set out in the section headed “Information on the Target Group” below for brief details of status on such licences and permits. As at the date of the announcement of the Company dated 3 July 2015, the Company has obtained a draft valuation report prepared by Savills Valuation and Professional Services Limited, an independent firm of professional valuers adopting the direct comparison approach and income capitalisation approach, showing the value of the Target Properties (being 100% of the property interest, having included the 35% interest in Jilin Ground Tourism Investment and its subsidiaries, being a sub-group of the Target Group holding part of the Target Properties) as at 31 March 2015 at the aggregate amount of approximately RMB6,621.7 million (equivalent to approximately HK$8,277.5 million). Based on the aforesaid and having taken into account all licences and approvals to be obtained prior to Completion, the Directors (including the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular) considered the Target Value fair and reasonable. In assessing the Target Value, the Group has consulted Savills Valuation and Professional Services Limited on the valuation methodology, market condition and other relevant matters which in Savills Valuation and Professional Services Limited’s experience might affect the Target Properties’ value.

As announced by the Company on 22 December 2015 in relation to the Second Supplemental Agreement, the Consideration payable to the Vendor at Completion remains at HK$4,650,000,000 despite the update in the property portfolio of the Target Group. In view of the time lapse since the Initial Agreement, the Directors and the Vendor considered it reasonable and have agreed to re-calculate the Consideration based on the latest financial information of the Target Group being made available. The updated

–43– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Consideration was derived based on the audited net asset value of the Target Group as of 31 August 2015, financial information of which was prepared in accordance with the HKFRSs. The calculation of the updated Consideration is as follows:

Notes: RMB (million)

Audited net asset value of the Target Group attributable to the Vendor as at 31 August 2015 as set out in the Accountants’ Report on the Target Group (a) 752

Add: Appreciation of the Target Properties based on a management’s estimated value of the Target Properties and the book value of the Target Properties as of 31 August 2015 (b) 3,341 Capital injection into the Target Company subsequent to 31 August 2015 (c) 400

Less: Estimated tax payable upon the sale of the Target Properties based on the estimated value 537 Estimated development and construction costs that is expected to be incurred subsequent to 31 August 2015 in order to arrive at the estimated value (excluding the Group’s interests) 236

Adjusted net asset value of the Target Group 3,720

Adjusted net asset value of the Target Group (HK$’ million) (based on the exchange rate stipulated in the Initial Agreement dated 26 May 2015) 4,650

Consideration (HK$’ million) 4,650

Notes:

(a) The audited consolidated net asset value of the Target Group as at 31 August 2015 under Hong Kong Generally Accepted Accounting Principles (HK GAAP), as compared with the unadjusted net asset value of Ground Real Estate Group as at 30 April 2015 under PRC Generally Accepted Accounting Principles (PRC GAAP), has taken into account (i) the results of the Target Group from 1 May 2015 to 31 August 2015; (ii) the fair value accounting of the Target Group’s investment properties and the related deferred tax; and (iii) valuation adjustments on the property assets held by Jilin Ground Tourism Investment (in which the Group has 35% equity interest) arising from the merger accounting of 65% equity interest as at 1 January 2014, details of which are set out in note 26 to the Accountants’ Report on the Target Group as set out in Appendix IIIA to this circular.

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(b) The appreciation of the Target Properties (being land and properties attributable to the Target Group) representing the difference between (i) the book value of the Target Properties (after deducting the Group’s interests) as at 31 August 2015 in the amount of RMB2,763 million and (iii) the estimated value of the Target Properties of RMB6,104 million from the Company’s management (after deducting the Group’s interest) having consulted with Savills on the valuation methodology, market condition, and other relevant matters which, in Savills’ experience, might affect the Target Properties value.

The Target Properties are land and property assets attributable to the Target Group that includes a new land plot in respect of Guangze Red House – Phase II acquired by a wholly-owned subsidiary of the Target Company in September 2015.

(c) A capital injection of RMB400 million into the Target Company by way of a [REDACTED] whereby one share of par value of US$1 [is allotted to] the Vendor subsequent to 31 August 2015 to offset the shareholder’s loan of RMB400 million for the sole purpose of financing the acquisition of Ground Real Estate Group as part of the reorganisation of the Target Group, details of which are set out in the section headed “History and Reorganisation of the Target Group” in this circular.

Taking into account the above factors, the Directors (including the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular) consider the Consideration is fair and reasonable, and is in the interests of the Company and the Independent Shareholders as a whole.

Further details of the Convertible Bonds, the Convertible Preference Shares and the Consideration Shares are set out in the paragraphs headed “The Convertible Bonds”, “The Convertible Preference Shares” and “The Consideration Shares” respectively below in this section.

Conditions precedent

Pursuant to the Sale and Purchase Agreement, completion of the Acquisition is conditional upon the satisfaction or waiver (as the case may be) of the following conditions:

(i) the Purchaser being satisfied with the results of the due diligence review on the Target Group;

(ii) if applicable, the Shareholders (except those who are required to abstain from voting in accordance with the Listing Rules and other applicable laws, rules and regulations) having passed the relevant resolutions at the SGM approving the Sale and Purchase Agreement and the transactions contemplated thereunder, including but not limited to the allotment and issue of the Convertible Bonds, the creation and issue of the Convertible Preference Shares, the allotment and issue of the Conversion Shares and the Consideration Shares, (where necessary) the Constituent Document Amendments (being defined in the Initial Agreement to mean such necessary amendments required to be made by the Company to its Bye-laws for the purpose of authorising the creation of the Convertible Preference Shares, the

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issue of the Convertible Preference Shares, and the incorporation of the terms of the Convertible Preference Shares) and the increase in the authorised share capital of the Company;

(iii) the Stock Exchange having granted the listing of and permission to deal in the Consideration Shares and the Conversion Shares;

(iv) the warranties given by the Vendor and Ms. Cui in the Sale and Purchase Agreement remaining true and accurate and not misleading, and there are no matter or events that might lead to the breach of the warranties given by the Vendor and/or Ms. Cui;

(v) the aggregate amount of (a) the aggregate value of the Target Properties as shown in the valuation report (in form and substance satisfactory to the Purchaser) prepared by a firm of independent professional valuers and set out in this circular and (b) the amount of recognised sale of the Target Properties as set out in the Post-Signing Accounts being not less than the Target Value (being RMB7,720,500,000);

(vi) the Purchaser having obtained a legal opinion (in form and substance satisfactory to the Purchaser) issued by a PRC law firm in relation to the Target Group and the transactions contemplated under the Sale and Purchase Agreement;

(vii) there being no material adverse change to any member of the Target Group;

(viii) the amounts due and owing between the Vendor, Ms. Cui, their respective associates on the one part and the Target Group on the other part being completely settled;

(ix) the Listing Committee of the Stock Exchange having granted an approval in principle of the new [REDACTED] in relation to the Acquisition, and such approval not having been revoked or cancelled;

(x) the Purchaser, the Vendor and Ms. Cui having obtained all necessary consents and approvals in relation to the Sale and Purchase Agreement and the transactions contemplated thereunder, and such consents and approvals having remained valid and legal;

(xi) Fusong Ground Real Estate Development Company Limited* (撫松廣澤房地產開發有限公司), a member of the Target Group, having completed the environmental inspection procedures and having obtained the construction land planning permit* (建設用地規劃許可證), construction work planning permit* (建設工程規劃許可證), construction work commencement permit* (建築工程施工許可證) in relation to a parcel of land relating to Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村), a property project of the Target Group, and such permits having remained valid and legal;

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(xii) Baishan Ground Real Estate Development Company Limited* (白山廣澤房地產開發有限公司), a member of the Target Group, having obtained the construction work completion inspection certificate* (竣工工程備案證)in relation to the plots of Guangze International Shopping Centre (廣澤國際購物中心), a property project of the Target Group, and such certificates and permits having remained valid and legal;

(xiii) Yanji Huize Real Estate Development Company Limited* (延吉市惠澤房地產開發有限公司) having completed the environmental inspection procedures, and obtain the construction land planning permit* (建設用地規劃許可證), construction work planning permit* (建設工程規劃許可證) and construction work commencement permit* (建築工程施工許可證) in relation to the whole of Guangze Red House — Phase II (廣澤紅府二期) and such permits having remained valid and legal;

(xiv) Jilin Ground Real Estate Company Limited* (吉林省廣澤地產有限公司), a member of the Target Group, having obtained the construction works completion inspection certificate* (竣工工程備案證) in relation to the plots of Phase II of Guangze • Amethyst City (廣澤•紫晶城2期) and Guangze • Tudors Palace (廣澤•瀾香), the property projects of the Target Group, and such certificates and permits having remained valid and legal; and

(xv) all guarantees granted by the associates of the Target Group for the purpose of supporting the financial arrangement of the Target Group having been released.

The Purchaser may waive in writing the condition set out in condition precedent (i) set out above, and save for such wavier, none of the above conditions can be waived. If any of the conditions set out above shall not have been fulfilled (or waived, as the case may be) on or before 12:00 noon, 31 March 2016 or such other date as the Vendor and the Purchaser may agree in writing, the Sale and Purchase Agreement shall cease and determine and neither party shall have any obligations and liabilities thereunder save for any antecedent breaches of the terms thereof. Depending on the results of the due diligence review on the Target Group, the Purchaser may consider waiving condition precedent (i) set out above in the event that there are only immaterial issues identified by the Purchaser during the due diligence review that do not have material adverse effect on the performance, prospect or operation of the Target Group as a whole. As at the Latest Practicable Date, the Group had no intention to waive condition precedent (i) set out above.

COMPLETION OF THE ACQUISITION

Completion of the Acquisition shall take place on the Completion Date, being the second Business Day after the conditions as respectively set out in the sub-paragraph headed “Conditions precedent” above have either been fulfilled or waived (as the case may be), or such other date as the Vendor and the Purchaser may agree in writing. It is currently expected that Completion shall take place no later than 31 March 2016, upon

–47– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD which the Target Company and its subsidiaries will become subsidiaries of the Company and their results, assets and liabilities will be consolidated into the consolidated financial statements of the Company.

The Board (including the independent non-executive Directors whose view is set out in the section head “Letter from the Independent Board Committee” in this circular) considers that the terms of the Sale and Purchase Agreement are fair and reasonable, are on normal commercial terms and are in the interests of the Company and the Independent Shareholders as a whole.

For the avoidance of doubt, there is no right provided in the Sale and Purchase Agreement conferring on the Vendor to nominate Directors upon Completion. As at the date of this circular, the Company does not expect changes to the composition of the Board by reason of the Acquisition immediately after Completion.

Immediately after Completion, the Company will be able to satisfy the minimum public float requirement under Rule 8.08 of the Listing Rules and there will be no change in control of the Company. Charm Success will remain as the controlling Shareholder of the Company under the Listing Rules and the Target Company will become an indirect wholly-owned subsidiary of the Company and its financial results will be consolidated into the financial statements of the Enlarged Group. Please refer to the paragraph headed “Effect on the shareholding structure of the Company” in this section for the shareholding structure of the Company immediately after Completion.

INTENTION TO CONTINUE EXISTING BUSINESS

After Completion, the Target Group will become the principal property development arm of the Enlarged Group whereas the Enlarged Group intends to continue its existing businesses in the provision of telecommunications retail sales and management services and property investment.

THE CONSIDERATION SHARES

Pursuant to the Sale and Purchase Agreement, the Company will issue an aggregate of 343,000,000 Consideration Shares to the Vendor upon Completion as part payment of the Consideration.

The aggregate 343,000,000 Consideration Shares represent (i) approximately 40.0% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 28.5% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares; and (iii) approximately 5.4% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares and all Conversion Shares.

The Consideration Shares will be allotted and issued under the specific mandate to be granted by the Shareholders at the SGM. The Consideration Shares will rank equally among themselves and pari passu in all respects with the Shares in issue on the date of allotment and issue of the Consideration Shares.

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THE CONVERTIBLE BONDS

Pursuant to the terms of the Sale and Purchase Agreement, the Company will issue the Convertible Bonds in the principal amount of HK$500,000,000 to the Vendor as part payment of the Consideration upon Completion.

The terms of the Convertible Bonds have been negotiated on an arm’s length basis, principal terms of which are summarised as follows:

Issuer : the Company

Maturity date : the 5th anniversary of the issue date of the Convertible Bonds

Interest : 2% per annum payable semi-annually in arrears in each year

CB Conversion Price : HK$0.85 per CB Conversion Share (subject to adjustments)

Aggregate principal : HK$500,000,000 amount

Transferability : the Convertible Bonds cannot be transferred without the prior written consent of the Company, save where transfer is made to a wholly-owned subsidiary, or the holding company owning the entire issued share capital, of holder of the Convertible Bond, in which case no prior written consent from the Company shall be required.

Conversion : holder(s) of the Convertible Bonds shall have the right at any time from date of issue of the Convertible Bonds up to 4:00 p.m. on the maturity date to convert in whole or in part the outstanding principal amount of the Convertible Bonds in whole multiples of HK$1,000,000 into CB Conversion Shares, save that if at any time the outstanding principal amount of the Convertible Bonds is less than HK$1,000,000, the whole (but not part only) of the outstanding principal amount of the Convertible Bonds may be converted. Any conversion of the Convertible Bonds does not result in the public float of the Shares being less than 25% (or any given percentage as required by the Listing Rules).

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Adjustments to CB : The events leading to adjustment to the CB Conversion Price Conversion Price are the following:

(i) an alteration of the nominal amount of each Share by reason of any consolidation or subdivision;

(ii) an issue by the Company of Shares (other than in lieu of a cash dividend) credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund);

(iii) a capital distribution being made by the Company to the Shareholders, whether on a reduction or otherwise, to Shareholders (in their capacity as such) or a grant by the Company to Shareholders (in their capacity as such) of rights to acquire for cash assets of the Company or any of its subsidiaries;

(iv) an offer of [REDACTED] for subscription by way of rights, or a grant of options or warrants to subscribe for [REDACTED] being made by the Company to Shareholders (in their capacity as such) at a price which is less than 80% of the “market price” on the date of the announcement of the terms of the offer or grant;

(v) an issue wholly for cash any securities by the Company which by their terms are convertible into or exchangeable for or carrying rights of subscription for [REDACTED] and the total effective consideration per Share receivable for such securities is less than 80% of the “market price” on the date of announcement of the terms of the issue of such securities; or the rights of conversion or exchange or subscription attached to any such securities are modified so that the total effective consideration per Share initially receivable for such securities shall be less than 80% of the “market price” at the date of announcement of such proposed modification; or

(vi) an issue of Shares wholly for cash at a price per Share which is less than 80% of the “market price” on the date of announcement of the terms of such issue.

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For the purpose of the above adjustment mechanism, “market price” means the average of the closing prices of one Share quoted on the Stock Exchange for each of the last five consecutive Stock Exchange dealing days on which dealings in the Shares on the Stock Exchange took place ending on the last such dealing day preceding the day on or as of which the market price is to be ascertained.

Upon the occurrence of any of the above adjustment events, the Company shall select an approved merchant bank or instruct the auditors of the Company for the time being to determine the adjustment to the CB Conversion Price in such manner as they consider appropriate in accordance with the terms and conditions of the Convertible Bonds

Early redemption : the Company may at any time before the maturity date redeem the Convertible Bonds (in whole or in part) at 100% of the principal amount of such Convertible Bonds

Voting rights and : holder(s) of the Convertible Bonds shall not be ranking entitled to attend or vote at any general meeting of the Company

Listing : the Convertible Bonds will not be listed on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the CB Conversion Shares

Assuming there will be no issue or repurchase of Shares from the date of this circular, upon the exercise in full of the conversion rights attaching to the Convertible Bonds at the CB Conversion Price, the Company will allot and issue an aggregate of 588,235,294 CB Conversion Shares, representing (i) approximately 68.5% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 32.9% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and the CB Conversion Shares (assuming the conversion rights attaching to the Convertible Bonds are exercised in full) but before issue of the CPS Conversion Shares; and (iii) approximately 9.3% of the issued share capital of the Company as enlarged by allotment and issue of all Consideration Shares and all Conversion Shares (assuming the conversion rights attaching to the Convertible Bonds and the Convertible Preference Shares are exercised in full).

The CB Conversion Shares will be allotted and issued under the specific mandate to be granted by the Shareholders at the SGM. The CB Conversion Shares shall rank equally

–51– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD among themselves and pari passu in all respects with the Shares in issue on the day immediately following the date of delivery of the conversion notice.

THE CONVERTIBLE PREFERENCE SHARES

Pursuant to the terms of the Sale and Purchase Agreement, the Company will issue 4,539,352,941 Convertible Preference Shares to the Vendor as part payment of the Consideration upon Completion.

The terms of the Convertible Preference Shares have been negotiated on an arm’s length basis, principal terms of which are summarised as follows:

Issuer : the Company

Nominal value : HK$0.05 each

CPS Conversion : HK$0.85 per CPS Conversion Share (subject to Price adjustments)

Notional value : HK$0.85, being the price at which each Convertible Preference Share is to be initially issued

Conversion ratio : the number of CPS Conversion Shares to be issued upon conversion shall be determined by dividing the aggregate notional value of the Convertible Preference Shares to be converted by the prevailing CPS Conversion Price

Conversion period : the period commencing from the business day immediately after the date of allotment and issue of the Convertible Preference Shares and ending on the date of all Convertible Preference Shares have been converted or purchased in full (or such earlier date as may be required under the laws)

Conversion right : holders of Convertible Preference Shares will have the right to convert all or such number of Convertible Preference Shares into CPS Conversion Shares during the abovementioned conversion period, but no conversion shall take place if the conversion would result in (i) the CPS Conversion Shares being issued at a price below their nominal value as at the conversion date; or (ii) if immediately after such conversion, the public float of the Shares falls below the minimum public float requirements stipulated under the Listing Rules

–52– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Redemption : the Convertible Preference Shares shall be non-redeemable by the Company or their holders

Fixed dividend : holder of each Convertible Preference Share shall be entitled to receive, out of funds legally available therefor, an accrued and cumulative fixed dividend commencing on the issue date of the Convertible Preference Share on a yearly basis at a rate of 0.2% of the nominal value of HK$0.05 of each Convertible Preference Share outstanding (subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalisation with respect to the Convertible Preference Shares), in priority to any dividend in respect of any other class of shares in the capital of the Company, which shall be paid in cash annually in arrears within 30 days after the conclusion of each annual general meeting of the Company; and the fixed dividend shall be accrued and accumulated to the following year in case the Company has insufficient legal funds available for distribution in a particular year

Capital : on return of capital on liquidation, winding up or dissolution of the Company, the Convertible Preference Shares shall confer on their holders the right to be paid, in priority to any return of assets in respect of the ordinary shares of the Company or any other class of shares in the share capital of the Company, pari passu as between themselves an amount equal to the aggregate notional value of the Convertible Preference Shares plus all dividends accrued and unpaid with respect thereto, whereupon if the assets of the Company available for distribution shall be insufficient to provide for full payment to holders of the Convertible Preference Shares, the Company shall make payment on the Convertible Preference Shares on a pro rata basis, but do not confer on the holders of Convertible Preference Shares any further or other right to participate in the assets of the Company upon liquidation, winding up or dissolution of the Company

–53– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Voting rights : the Convertible Preference Shares shall not confer on the holders thereof the right to receive notice of, or to attend and vote, at a general meeting of the Company unless a resolution is to be proposed which if passed would vary or abrogate the rights or privileges of holders of the Convertible Preference Shares, in which event such holders shall have the right to receive notice of, and to attend and vote (by way of poll whereupon holders of Convertible Preference Shares shall have one vote for each Convertible Preference Share) at that general meeting, save that such holders may not vote upon any business dealt with at such meeting except (i) the election of a chairman, (ii) any motion for adjournment or relating to the proceedings of the general meeting; and (iii) the resolution which if passed would so vary or abrogate the rights or privileges of holders of the Convertible Preference Shares

For the avoidance of doubt, Bye-law 10 of the Bye-laws provides that the rights of the Convertible Preference Shares may only be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class

As holders of the Convertible Preference Shares will only be permitted to attend or vote at general meetings of the Company where a resolution is proposed to vary the rights or privileges of holders of the Convertible Preference Shares pursuant to Bye-law 10 of the Bye-laws, a separate class meeting of the holders of the Convertible Preference Shares will need to be held for purposes of approving any share rights variation proposed

Transferability: : the provisions of the Bye-laws relating to a transfer of Shares apply to the Convertible Preference Shares, provided that if any Convertible Preference Share is intended to be transferred to a connected person of the Company, such transfer shall comply with the requirements under the Listing Rules

–54– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Ranking : the Convertible Preference Shares rank, subject to applicable laws, in priority to the Shares and any other shares in the share capital of the Company as to dividend and return of capital on liquidation, winding up or dissolution of the Company

Adjustment to CPS : the events leading to adjustment to the CPS Conversion Price Conversion Price are the following:

(i) an alteration in the nominal value of the Shares by reason of any consolidation or sub-division;

(ii) an issue by the Company by way of capitalisation of any amount of profits or reserves (including any share premium account or contributed surplus account) and apply the same in paying up in full the nominal value of any Shares (other than any Shares credited as fully paid out of distributable profits or reserves (including any share premium account or contributed surplus account) and issued in lieu of the whole or any part of a cash dividend or specie distribution which the holders of the Shares concerned would or could otherwise have received and which would not have constituted a Capital Distribution (as defined below);

(iii) a making by the Company of any Capital Distribution;

(iv) an offer by the Company to the holders of Shares for subscription by way of rights, or shall grant to holders of Shares any options or warrants to subscribe for [REDACTED], at a price which is less than 80 per cent. of the “market price” at the date of the announcement of the terms of the offer or grant;

–55– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

(v) a purchase by the Company of any Shares or securities issued by the Company or any of its subsidiaries which are convertible into or exchangeable for Shares or any rights to acquire Shares (other than on the Relevant Stock Exchange (as defined in the “Terms of the Convertible Preference Shares” attached as Appendix 4 to the Supplemental Agreement)) and the Directors cancel such Ordinary Shares, securities convertible into or exchangeable for Shares or rights to acquire Shares, the Directors may if they consider it appropriate make an adjustment to the CPS Conversion Price, provided that the Directors shall have appointed an approved merchant bank to certify if such adjustment to the CPS Conversion Price is, in its opinion, appropriate.

“Capital Distribution” means any distribution paid or made by the Company on Shares to the extent that the amount of such distribution exceeds the amount calculated by reference to the aggregate of (i) the net consolidated profits less the aggregate of the net consolidated losses of the Group in respect of the financial period ending on 31 March 2015 and each subsequent financial period in respect of which an audited account of the Group has been published, less (ii) the aggregate amount of all distributions then already paid or made by the Company on Shares in respect of any and all financial periods ending on or after 31 March 2015

–56– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Upon the occurrence of any of the above adjustment events, the Company shall select an approved merchant bank or instruct the auditors of the Company for the time being to determine the adjustment to the CPS Conversion Price in such manner as they consider appropriate in accordance with the terms and conditions of the Convertible Preference Shares

For the avoidance of doubt, no adjustment shall be made so that the CPS Conversion Price will fall below the nominal value of the Shares on the relevant conversion date

Listing : the Convertible Preference Shares will not be listed on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the CPS Conversion Shares

Assuming there will be no issue or repurchase of Shares from the date of this circular, upon the exercise in full of the conversion rights attaching to the Convertible Preference Shares at the Conversion ratio based on the initial CPS Conversion Price, the Company will allot and issue an aggregate of 4,539,352,941 CPS Conversion Shares, representing (i) approximately 528.8% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 79.1% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and the CPS Conversion Shares (assuming the conversion rights attaching to the Convertible Preference Shares are exercised in full) but before issue of the CB Conversion Shares; and (iii) approximately 71.7% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and all Conversion Shares (assuming the conversion rights attaching to the Convertible Preference Shares and the Convertible Bonds are exercised in full).

The CPS Conversion Shares will be allotted and issued under the specific mandate to be granted by the Shareholders at the SGM. The CPS Conversion Shares shall rank equally among themselves and pari passu in all respects with the Shares in issue on the date of allotment and issue of the CPS Conversion Shares.

–57– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

THE ISSUE PRICE, THE CB CONVERSION PRICE AND THE CPS CONVERSION PRICE

The Issue Price, the CB Conversion Price and the CPS Conversion Price are the same, being HK$0.85 per Share. Each of the Issue Price, the CB Conversion Price and the CPS Conversion Price was determined after arm’s length negotiations between the Group and the Vendor, with reference to the average closing prices of the Shares from 19 March 2015 (being the date of the first announcement of the Company in respect of the Acquisition) and 22 May 2015 (being the Last Trading Day), which are detailed below. Each of the Issue Price, the CB Conversion Price and the CPS Conversion Price represents:

(i) a premium of approximately [REDACTED] over the closing price of HK$0.82 per Share as quoted on the Stock Exchange on 19 March 2015, being the date of the first announcement of the Company in respect of the Acquisition;

(ii) a discount of approximately [REDACTED] to the closing price of HK$1.310 per Share as quoted on the Stock Exchange on 22 May 2015, being the Last Trading Day;

(iii) a discount of approximately [REDACTED] to the average closing price of HK$1.006 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including Last Trading Day;

(iv) a discount of approximately [REDACTED] to the average closing price of HK$0.941 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including Last Trading Day; and

(v) a premium of approximately [REDACTED] over the unaudited consolidated net assets attributable to equity holders of the Company of approximately HK$0.815 per Share as at 30 September 2015, based on the unaudited consolidated net assets and the number of issued shares as set out in the interim report of the Company for the six months ended 30 September 2015.

The Board (including the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular) considers the CB Conversion Price, the CPS Conversion Price and the Issue Price are fair and reasonable and is in the interests of the Company and the Independent Shareholders as a whole.

APPLICATION FOR LISTING

On 31 December 2015, the Joint Sponsors submitted to the Stock Exchange a [REDACTED] on behalf of the Company for the listing of, and permission to deal in, among others, the Consideration Shares to be allotted and issued upon Completion, the CB Conversion Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds and the CPS Conversion Shares to be issued upon the conversion of the Convertible Preference Shares.

–58– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

For the avoidance of doubt, no application will be made for the listing of the Convertible Bonds or the Convertible Preference Shares on the Stock Exchange or any other stock exchange.

REASONS FOR AND BENEFITS OF THE ACQUISITION

(a) The Target Group is already generating profit

The Group’s revenue is mainly attributable to its telecommunications retail sales and management services segment. As a whole, the Group made a loss of approximately HK$3.9 million and approximately HK$22.7 million for the years ended 31 March 2014 and 2015 respectively.

For the two years ended 31 December 2013 and 2014 and eight months ended 31 August 2015, the Target Group generated net profit of approximately RMB91.0 million, RMB200.0 million and RMB159.9 million respectively. As at 31 October 2015, the Target Group had a property portfolio of seven property projects in Jilin Province, comprising five residential projects, an integrated leisure and shopping centre, as well as a tourism property project. As at 31 October 2015, the total GFA of the property projects held by Target Group in Jilin Province amounted to 1,783,131 sq.m. pursuant to the valuation report prepared by Savills Valuation and Professional Services Limited as set out in Appendix VIB of this circular. Based on the abovementioned financial performance of the Target Group, it is expected that the Acquisition would help the Enlarged Group to improve its profitability. In addition, the Group will also achieve diversification, whereupon its revenue and income can be diversified from its telecommunications retail sales and management services segment.

(b) Following Completion, the Enlarged Group can leverage on the platform of the Target Group to accelerate property development business and create additional value for its Shareholders

The existing property portfolio of the Group is only made up of its Hong Kong based investment properties and its 35% interest in Jilin Ground Tourism Investment which is also a member of the Target Group (with the remaining 65% of its interests being held by the Target Group). Despite ongoing challenges in the PRC property market, the Group believes that long term demand for housing in the PRC will be sustainable due to the continual growth in the PRC economy, the continual urbanisation process, the general increasing trend of disposable income and purchasing power of PRC residents, as well as demand for real estate ownership driven by housing needs of newly married couples in the PRC. The Target Group has been focusing in the property development market in Jilin Province since 2010, and has built up a portfolio of property projects. The Acquisition would allow the Group

–59– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

to fast track the growth of the scale of its property development and management business. Following Completion, the Directors believe that the Company can leverage on the platform of the Target Group to accelerate property development business particularly in Jilin Province.

(c) The Enlarged Group will have a larger asset base, thereby stronger capacity to raise funds for its long term development

Following Completion, the Enlarged Group will have larger asset base, and be in a stronger financial position to obtain financing. The Directors believe that the Enlarged Group due to its increased business scale will be in a more favourable position to obtain financing with more competitive terms from banks and other financial institutions, as well as to raise funds in the capital market. The Directors therefore believe that the Enlarged Group will have stronger capability to raise funds to develop its business so as to create additional value for its Shareholders.

(d) The Target Group is a local property developer in Jilin Province and its management team and track record can help the Enlarged Group to further develop its property development and management business in Jilin Province and better position the Enlarged Group to expand into other provinces when the opportunity arise

The Target Group was established in 2010 and has built up a balanced portfolio of residential, commercial and tourism properties in Jilin Province. According to the Vendor, in building its property portfolio, the management of the Target Group has been successful in acquiring land at which the management of the Target Group believes to be suitable for property project development in Jilin Province. As such the Directors believe the Acquisition would help the Enlarged Group to build and scale up its presence in Jilin Province significantly. In addition, the Directors believe leveraging on the track record and experience of the Target Group in Jilin Province, the Enlarged Group can be in a better position to expand into other provinces in the PRC as and when the opportunity arises.

The Directors (including the independent non-executive Directors whose views are set out in the section headed “Letter from the Independent Board Committee” in this circular) are of the view that the terms of the Sale and Purchase Agreement, which have been agreed after arm’s length negotiations, are on normal commercial terms and such terms are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

–60– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

EFFECT ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

The following chart depicts, assuming there being no issue (other than the Consideration Shares and the Conversion Shares) or repurchase of Shares from the Latest Practicable Date up to Completion, the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) upon Completion but without taking into account the exercise of any Convertible Bonds and the Convertible Preference Shares; and (iii) upon Completion having taken into account the exercise in full of conversion rights attaching to the Convertible Bonds at the CB Conversion Price and the exercise in full of the conversion rights attaching to the Convertible Preference Shares:

Immediately after allotment and issue of (i) the Consideration Shares; (ii) the CB Conversion Shares upon the exercise in full of Immediately after allotment the conversion rights and issue of Consideration attaching to the Convertible Shares, but before the Bonds; and (iii) the CPS exercise of the conversion Conversion Shares upon the rights attaching to the exercise in full of the Convertible Bonds and the conversion rights attaching As at the Convertible Preference to the Convertible Shareholders Latest Practicable Date Shares Preference Shares (Note 1) Approximate Approximate Approximate Shares % Shares % Shares %

Charm Success (Note 2) 558,020,694 65.0 558,020,694 46.5 558,020,694 8.8 The Vendor (Note 2) – – 343,000,000 28.5 5,470,588,235 86.4

Sub-total – – 901,020,694 75.0 6,028,608,929 95.2

Public: Public Shareholders 300,429,306 35.0 300,429,306 25.0 300,429,306 4.8

Total 858,450,000 100.0 1,201,450,000 100.0 6,329,038,235 100.0

Notes:

1. The shareholding structure set out in this column is shown for illustration purpose only. Pursuant to conversion restrictions under the terms and conditions of the Convertible Bonds and the Convertible Preference Shares, no conversion right may be exercised if such would result in the public float of the Shares being less than 25% (or any given percentage as required by the Listing Rules).

2. As at the date of this circular, Charm Success and the Vendor are ultimately beneficially wholly-owned by Ms. Cui, the daughter of Ms. Chai, who in turn is an executive Director and the chairperson of the Board.

–61– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

SUPPLEMENTAL AGREEMENT AND SECOND SUPPLEMENTAL AGREEMENT

The parties to the Initial Agreement entered into the Supplemental Agreement on 3 July 2015 so as to, among others, allow the Group to preserve its capital for future development by taking away the part settlement of Consideration as to HK$200 million by cash, to include an additional PRC entity into the Target Group, and to clarify certain matters as set out in the Initial Agreement.

In September 2015, the Target Group entered into a land use rights grant contract* (國有建設用地使用權出讓合同) to obtain land use rights of a parcel of land of approximately 51,854.9 sq.m. (“Plot E1”) in Yanji City, Jilin Province, the PRC. In order to cater for the inclusion of Plot E1 into the property portfolio of the Target Group and the extension of the long stop date by which the conditions precedent set out in the Sale and Purchase Agreement have to be satisfied, the Purchaser, the Vendor and Ms. Cui entered into the Second Supplemental Agreement. The amendments, as set out in the Second Supplemental Agreement, do not give rise to any revision to the Consideration, which remains at HK$4,650,000,000.

Set out below is a summary of the principal amendments made to the Initial Agreement pursuant to the Supplemental Agreement and the Second Supplemental Agreement:

Second Supplemental Initial Agreement Supplemental Agreement Agreement

1. Settlement of Consideration (i) as to HK$200,000,000 by (i) as to HK$500,000,000 by — upon Completion cash; way of issue of the Convertible Bonds; (ii) as to HK$500,000,000 by way of issue of the (ii) as to HK$3,858,450,000 by Convertible Bonds; way of allotment and issue of the Convertible (iii) as to HK$3,658,450,000 by Preference Shares; and way of allotment and issue of the Convertible (iii) as to HK$291,550,000 by Preference Shares; and way of allotment and issue of the Consideration (iv) as to HK$291,550,000 by Shares way of allotment and issue of the Consideration Shares

2. Number of Convertible 4,304,058,823 4,539,352,941 — Preference Shares

–62– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Second Supplemental Initial Agreement Supplemental Agreement Agreement

3. Delivery upon Completion (i) certificate(s) in relation to (i) certificate(s) in relation to — 4,304,058,823 convertible 4,539,352,941 Convertible Preference Shares; Preference Shares

(ii) payment of HK$200,000,000

4. Increase in authorised share 4,304,058,823 convertible the Convertible Preference Shares — capital of the Company preference shares be created, and (being 4,539,352,941 Convertible the authorised share capital of the Preference Shares of HK$0.05 Company be increased from each) be created, and the HK$780,000,000 (divided into authorised share capital of the 15,600,000,000 Shares) to Company be increased from HK$995,202,941.15 (divided into HK$780,000,000 (divided into 15,600,000,000 Shares and 15,600,000,000 Shares) to 4,304,058,823 convertible HK$1,006,967,647.05 (divided into preference shares) 15,600,000,000 Shares and 4,539,352,941 Convertible Preference Shares)

5. Dividend of Convertible each Convertible Preference Share holder of each Convertible — Preference Shares shall confer on its holder, in case Preference Share shall be entitled of any cash dividend being to receive, out of funds legally declared and paid by the available therefor, an accrued and Company to holder of its ordinary cumulative fixed dividend shares, the same entitlement to commencing on the issue date of cash dividend pari passu with the Convertible Preference Share holders of ordinary shares of the on a yearly basis at a rate of 0.2% Company of the nominal value of HK$0.05 of each Convertible Preference Share outstanding in priority to any dividend in respect of any other class of shares in the capital of the Company

–63– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Second Supplemental Initial Agreement Supplemental Agreement Agreement

6. Amount due and owing in the Initial Agreement, it was in the Supplemental Agreement, it in the Second Supplemental among the Vendor, Ms. Cui, stated the amount due and owing was further detailed that as at the Agreement, it was detailed that as their respective associates among the Vendor, Ms. Cui, their date of the Supplemental at the date of the Second and the Target Group respective associates and the Agreement, the amounts due and Supplemental Agreement, the (relating to condition Target Group as at the date of the owing among the Vendor, Ms. amounts due and owing among precedent (viii) as set out in Initial Agreement amounted to Cui, their respective associates the Vendor, Ms. Cui, their the sub-paragraph headed RMB9,000,000 and the Target Group were as respective associates and the “Conditions precedent” follows: Target Group are as follows: above) (i) Jilin Rongyu Investment (i) Jilin Rongyu Investment Company Limited* (吉林 Company Limited* (吉林省融裕投資有限公司)(a 省融裕投資有限公司)(a member of the Target member of the Target Group) owing to an Group) owing to an associate of the Vendor associate of the Vendor RMB340,000,000; RMB340,000,000;

(ii) Jilin Rongli Investment (ii) Jilin Rongli Investment Company Limited* (吉林 Company Limited* (吉林省融利投資有限公司)(a 省融利投資有限公司)(a member of the Target member of the Target Group) owing to (a) an Group) owing to (a) an associate of the Vendor associate of the Vendor RMB30,000,000; and (b) RMB30,000,000; and (b) another associate of the another associate of the Vendor RMB30,000,000; Vendor RMB30,000,000;

(iii) an associate of the Vendor (iii) an associate of the Vendor owing to Ground Real owing to Ground Real Estate Group Company Estate Group Company Limited* (廣澤地產集團股 Limited* (廣澤地產集團股份有限公司) (a member of 份有限公司) (a member of the Target Group) the Target Group) RMB91,757,966; RMB176,348,300;

(iv) Jilin Zhujia Real Estate (iv) Jilin Zhujia Real Estate Development Company Development Company Limited* (吉林市築家房地 Limited* (吉林市築家房地產開發有限公司) (see item 產開發有限公司) owing to 8 below) owing to an an associate of the Vendor associate of the Vendor RMB97,000,000, plus RMB97,000,000; and interest at an annual rate of 20% calculated from 6 May 2015; and

–64– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Second Supplemental Initial Agreement Supplemental Agreement Agreement

(v) Baishan Ground Real (v) Baishan Ground Real Estate Development Estate Development Company Limited* (白山 Company Limited* (白山市廣澤房地產開發有限市廣澤房地產開發有限公司) (a member of the 公司) (a member of the Target Group) owing an Target Group) owing to an associate of the Vendor associate of the Vendor RMB43,500,000 RMB43,500,000, plus interest at an annual rate of 20% calculated from 6 May 2015.

7. Management accounts in the Initial Agreement, it was in the Supplemental Agreement, it — stated the unaudited consolidated was provided the following two balance sheet of the Target Group separate groups of accounts were as at 30 April 2015 and the attached instead for giving of consolidated profit and loss certain warranties: accounts for the 4 months ended 30 April 2015 were attached (i) the unaudited thereto for giving of certain non-consolidated balance warranties sheet as at 30 April 2015 and the unaudited profit and loss accounts for the 4 months ended 30 April 2015 of the Target, Xin Rui Investments Limited, Jilin Province Xinrui Enterprise Management Consultation Co., Ltd. (吉林省鑫銳企業管理咨詢有限公司), Jilin Rongli Investment Company Limited* (吉林省融利投資有限公司) and Jilin Rongyu Investment Company Limited* (吉林省融裕投資有限公司); and

(ii) the unaudited balance sheet as at 30 April 2015 and the unaudited profit and loss accounts for the 4 months ended 30 April 2015 of Ground Real Estate and its subsidiaries (all being PRC entities of the Target Group)

–65– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Second Supplemental Initial Agreement Supplemental Agreement Agreement

8. Inclusion of an additional there were 19 PRC entities in the addition of a former subsidiary of — company into the Target Target Group the Target Group, Jilin Zhujia Real Group Estate Development Company Limited* (吉林市築家房地產開發有限公司) as member of the Target Group

9. Condition precedent in the Purchaser having obtained a the aggregate amount of (a) the — relation to Target Value valuation report (in form and aggregate value of the Target substance satisfactory to the Properties as shown in the Purchaser) on the Target valuation report set out in this Properties prepared by a firm of circular; and (b) the amount of independent professional valuers recognised sale of the Target and set out in this circular Properties as set out in the showing the aggregate value of Post-Signing Accounts should not the Target Properties to be not less be less than RMB7,720.5 million than RMB6,562 million

10. Condition precedent in – addition of a condition precedent replacement of the reference to relation to land plot no. such that Yanji Huize Real Estate Old Plot with the land plot in 0962-89 Development Company Limited* respect of Guangze Red House (“Old Plot”) and (延吉市惠澤房地產開發有限公司)(a Phase II (廣澤紅府二期) (where Plot E1 member of the Target Group) Plot E1 is situated), whereupon having obtained the land use right Yanji Huize Real Estate certificate* (土地使用權證)in Development Company Limited* relation to the land plot no. (延吉市惠澤房地產開發有限公司) 0962-89 shall complete the environmental inspection procedures, and obtain the construction land planning permit* (建設用地規劃許可證), construction work planning permit* (建設工程規劃許可證) and construction work commencement permit* (建築工程施工許可證)in relation to the whole of Guangze Red House Phase II (廣澤紅府二期)

–66– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Second Supplemental Initial Agreement Supplemental Agreement Agreement

11. Condition precedent in the environmental inspection only two parcels of land of only one parcel of land of relation to Changbaishan procedures must have been Changbaishan Ground Pine Changbaishan Ground Pine Ground Pine Township completed, and the construction Township International Resort (長 Township International Resort International Resort (長白山 land planning permit* (建設用地規白山廣澤果松小鎮國際度假村)are (長白山廣澤果松小鎮國際度假村)is 廣澤果松小鎮國際度假村), a 劃許可證), construction work required to complete required to complete property project of the Target planning permit* (建設工程規劃許 environmental inspection environmental inspection Group 可證), construction work procedures, and the construction procedures, and the construction commencement permit* (建築工程 land planning permit* (建設用地規 land planning permit* (建設用地規施工許可證) must have been 劃許可證), construction work 劃許可證), construction work obtained in relation to the whole planning permit* (建設工程規劃許 planning permit* (建設工程規劃許 of Changbaishan Ground Pine 可證), construction work 可證) and construction work Township International Resort (長 commencement permit* (建築工程 commencement permit* (建築工程白山廣澤果松小鎮國際度假村) 施工許可證) be obtained in 施工許可證) be obtained in relation thereto relation thereto

12. Condition precedent in Baishan Ground Real Estate such condition precedent has been — relation to Guangze China Development Company Limited* deleted House I Phases I and II, a (白山市廣澤房地產開發有限公司), a property project of the Target member of the Target Group, must Group have obtained all the construction work commencement permit* (建築工程施工許可證) in relation to the plots of Guangze China House I Phases I and II (廣澤蘭亭1期一標段和二標段)

13. Warranties – certain warranties are amended to certain warranties and reflect the above changes and the undertakings, information in latest status of the Target Group relation to the Target Group such as the property projects, land and tenancy agreements of the Target Group were amended

14. [REDACTED] (which [REDACTED][REDACTED] represent the entire issued share capital in the Target Company)

15. Extension of long stop date 12 noon, 31 December 2015 — 12 noon, 31 March 2016 by which the conditions precedent should be fulfilled or waived, as the case may be

–67– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

In respect of the amendments as set out in the Second Supplemental Agreement, set out below are the respective reasons therefor and the item numbers below correspond to those in the table above:

• item 6(iii) – the amendment was to provide an update on the amount owing to Ground Real Estate by an associate of the Vendor that needs to be settled prior to the Completion of the Acquisition;

• item 6(iv) – the change to an interest-bearing advance was after discussions between the management of the Target Group and the associate of the Vendor on the original terms of the advance (i.e. interest rate and repayment schedule), whereby the management of Ground Real Estate agreed that the advance should become interest-bearing in view of the prolonged period of the advance on an interest free basis;

• item 6(v) – the change to an interest-bearing advance was after discussions between the management of the Target Group and the associate of the Vendor on the original terms of the advance (i.e. interest rate and repayment schedule), whereby the management of Ground Real Estate agreed that the advance should become interest-bearing in view of the prolonged period of the advance on an interest free basis;

• item 10 – as mentioned above, the Target Group obtained another land parcel (i.e. Plot E1) in Yanji City, Jilin Province, the PRC in September 2015 with a site area of approximately 51,854.9 sq.m., which has included the Old Plot, at a consideration of RMB121,778,960. The amendment is to reflect the addition of this new land parcel in the Target Group’s property portfolio and to include the relevant licences and permits that need to be obtained prior to the Completion of the Acquisition pursuant to the relevant condition precedent;

• item 11 – subsequent to the Sale and Purchase Agreement, there had been certain changes in the construction plan of Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村). As a result, the construction schedule in respect of the properties on the second parcel of land has been adjusted to facilitate such changes. The amendment was to reflect the number of land parcel that is required to complete the relevant procedures, and to obtain the relevant permits pursuant to the relevant condition precedent;

• item 13 – these changes were made to take into account the latest status of the Target Group;

• item 14 – the addition of one more Sale Share was a result of the [REDACTED] (as defined in the Second Supplemental Agreement) to be made by the Target Company to the Vendor prior to the Completion of the Acquisition for capitalising the shareholder’s loan to be injected by the Vendor to the relevant members of the Target Group to settle part of the amounts due and owing between the Vendor, Ms. Cui, their associates on the one part and the Target Group on the other part as referred to in the relevant condition precedent; and

–68– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

• item 15 – the amendment was to reflect the fact that the Company requires additional time to complete the due diligence review on the Target Group in respect of the Acquisition and accordingly, the Vendor, the Purchaser and Ms. Cui agreed to extend the long stop date.

The Board (including the independent non-executive Directors whose view is set out in the section headed “Letter from the Independent Board Committee” in this circular) considers that the terms of the Supplemental Agreement and the Second Supplemental Agreement are fair and reasonable, are on normal commercial terms and are in the interests of the Company and the Independent Shareholders as a whole.

FINANCIAL EFFECT OF THE ACQUISITION ON THE COMPANY

Following Completion, the Target Company will become a wholly-owned subsidiary of the Company and the financial results of the Target Group will be consolidated into the financial statements of the Group.

Based on the audited financial results of the Group for the year ended 31 March 2015 and the audited financial results of the Target Group and of Wan Sheng for the year ended 31 December 2014 and assuming that Acquisition had taken place on 1 April 2014, the revenue of the Enlarged Group is expected to significantly increase from approximately RMB107.9 million to RMB951.7 million and the net results attributable to the owners of the Enlarged Group will be significantly changed from loss of approximately RMB18.9 million to the profit of approximately RMB417.3 million due to the following reasons: (i) the loss attributable to the owners of the Group of approximately RMB18.9 million for the year ended 31 March 2015 and (ii) the loss attributable to the owners of Wan Sheng of approximately RMB7.5 million for the year ended 31 December 2014; offset by (iii) the profit attributable to the owners of the Target Group of approximately RMB140.8 million for the year ended 31 December 2014; and adjusted by the pro forma adjustments aggregating to approximately RMB302.9 million for gain on bargain purchase, transaction cost related to the transaction, elimination of share of results of associates, interest expenses for the Convertible Bonds and exchange difference arising from elimination of entrusted loan between the Group and Wan Sheng.

Based on the unaudited financial position of the Group as at 30 September 2015, the audited financial position of the Target Group as at 31 August 2015 and the audited financial position of Wan Sheng as at 30 June 2015 and assuming the Acquisition had taken place on 30 September 2015, it is expected that the net assets attributable to owners of the Group as enlarged by the Target Group will increase from approximately RMB583.3 million to approximately RMB1,354.6 million mainly due to the inclusion of the Target Group’s property projects in the accounts of the Group as enlarged by the Target Group and Wan Sheng.

The Acquisition will be satisfied by the Consideration Shares and partly by the issuance of Convertible Preference Share and Convertible Bonds, and hence there will be no material negative impact on the cashflow of the Enlarged Group in this regard.

–69– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

INFORMATION ON THE GROUP

The Company was incorporated in Bermuda with limited liability and the issued Shares are listed on the Main Board of the Stock Exchange. The Group is primarily engaged in the provision of telecommunications retail sales and management services, property development and management business, as well as property investment.

In October 2013, Charm Success acquired approximately 55.13% of the then issued share capital of the Company, and it made a mandatory cash offer for all the then issued shares of the Company (other than those already owned by it and its parties acting in concert). Following completion of the mandatory cash offer in November 2013, Charm Success became interested in approximately 55.16% of the then issued share capital of the Company. As at the Latest Practicable Date, Charm Success is interested in approximately 65% of the issued share capital of the Company. Charm Success is wholly-owned by Ms. Cui, who is the ultimate beneficial owner of the Vendor and the daughter of Ms. Chai, who in turn is an executive Director and the chairperson of the Board.

INFORMATION ON THE VENDOR

According to the Vendor, it is an investment holding company incorporated in the BVI with limited liability and is ultimately beneficially wholly-owned by Ms. Cui.

INFORMATION ON THE TARGET GROUP

Shareholding structure of the Target Group

The Target Company was incorporated by the Vendor on 4 April 2014. Please refer to the shareholding structure of the Target Group (i) as at the Latest Practicable Date on page [173] of this circular; and (ii) immediately after Completion on page [175] of this circular, based on the information provided by the Vendor.

Business of the Target Group

As at the date of this circular, the Group is interested in 35% of the registered capital of Jilin Ground Tourism Investment, a member of the Target Group.

–70– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

As at the Latest Practicable Date, the property portfolio of the Target Group comprised seven property projects all situated in Jilin Province. Set out below is a table showing the major subsidiaries, their principal business and major assets of the Target Group according to the Vendor, as well as the property portfolio of the Target Group as at 31 October 2015 based on the valuation report set out in Appendix VIB to this circular:

Details of major subsidiaries Details of property portfolio Actual/ Estimated Interests total GFA attributable as at 31 to the Name of Principal Intended October Target subsidiary business Major assets Projects Location use Status 2015 Group (Note 1) (sq.m.)

Residential and commercial

Jilin Ground Property Properties under 1. Guangze • Amethyst Jilin City Real Estate development development and City (廣澤•紫晶城) Company (residential) properties for sale (i) Phase I residential Held for sale 10,488.70 100% Limited* (see details of (吉林省廣澤地產 property projects (ii) Phase II and 有限公司) on the right) relocated district residential Held for sale 69,978.67 100% 2. Guangze • Tudors Palace Jilin City residential Under 107,469.00 100% (廣澤•瀾香) (Note 6) development

Yanji Huize Property Properties under 3. Guangze Red House Yanji City Real Estate development development (廣澤紅府) Development (residential) (i) Phase I residential Under 82,315.35 100% Company development Limited* (延吉市惠澤房地 (ii) Phase II (Note 4) residential Under 130,700.00 100% 產開發有限公司) development

Baishan Ground Property Investment 4. Guangze China House Baishan Real Estate development properties, (廣澤蘭亭) City Development (residential properties under (i) Guangze China residential Under 128,736.30 100% Company and development and Phase I development Limited* (白山 commercial) properties for sale (ii) Guangze China residential (Note 2) 84,333.40 100% 市廣澤房地產開 (see details of Phase II 發有限公司) property projects on the right) 5. Guangze International Baishan commercial Held for 68,432.89 100% Shopping Centre (廣澤國 City investment 際購物中心) (Note 5)

6. Portion of Guangze Baishan residential Held for sale 34,383.13 100% International Shopping City and Centre containing commercial residential development (Note 5)

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Tourism property project

Jilin Ground Property Properties held 7. Changbaishan Ground Fusong tourism Held for 1,150,627.00 65% Tourism development for future Pine Township County future (Note 7) Investment (tourism) development (see International Resort development details of (長白山廣澤果松小鎮國際 property project 度假村) (Note 3) on the right)

Notes:

1. The project names referred to in this circular are names used, or those the Target Group intends to use, to market its properties as at the date of this circular. They are included in this circular for reference purpose only and shall not be treated as the official names of the project. Furthermore, the English names of the project names are translations of their Chinese names and are included for identification purpose only, and should not be regarded as their official translations.

2. According to the Vendor, the land use right certificate* (土地使用權證) relating to such parcel of land or projects has yet been obtained.

3. According to the Vendor, the construction land planning permit* (建設用地規劃許可證), construction work planning permit* (建設工程規劃許可證) and construction work commencement permit* (建築工程施工許可證) relating to some of these parcels of land have yet been obtained.

4. According to the Vendor, the construction work planning permit* (建設工程規劃許可證) and construction work commencement permit* (建築工程施工許可證) relating to some plots of this project has yet been obtained.

5. According to the Vendor, the construction work completion inspection certificate* (竣工工程備案證) of this project has yet been obtained.

6. According to the Vendor, the construction work completion inspection certificate* (竣工工程備案證) of this project has yet been obtained.

7. The remaining 35% interest of the property is vested in the Group.

Please refer to the section headed “Business of the Target Group” in this circular for further details of the Target Group, its property portfolio and businesses.

–72– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Financial Information of the Target Group

The Accountants’ Report on the Target Group is set out in Appendix IIIA to this circular. Set out below is the audited consolidated financial information of the Target Group for each of the three years ended 31 December 2014 and the eight months ended 31 August 2015, which was prepared in accordance with the financial reporting standards and interpretations issued by the Hong Kong Institute of Certified Public Accountants:

For the eight For the year For the year For the year months ended ended ended ended 31 December 31 December 31 December 31 August 2012 2013 2014 2015 (RMB’000) (RMB’000) (RMB’000) (RMB’000)

Net profit before taxation 201,121 120,770 257,352 301,583

Net profit after taxation 140,716 90,958 200,252 159,914

As at As at As at As at 31 December 31 December 31 December 31 August 2012 2013 2014 2015 (RMB’000) (RMB’000) (RMB’000) (RMB’000)

Net asset value 343,434 434,393 1,219,656 956,992

RISKS ASSOCIATED WITH THE ACQUISITION, THE BUSINESS OF THE ENLARGED GROUP AND SO FORTH

The risks relating to the Acquisition, the business of the Enlarged Group, the business, legal and regulatory environment for property development in the PRC and the general economic, legal and political climate in the PRC and so forth are set out in the section headed “Risk Factors” in this circular.

IMPLICATIONS UNDER THE LISTING RULES IN RELATION TO THE ACQUISITION

The Acquisition constitutes:

(i) a very substantial acquisition of the Company under Chapter 14 of the Listing Rules as the applicable percentage ratios are over 100%;

(ii) a connected transaction of the Company under Chapter 14A of the Listing Rules as the Vendor is a connected person of the Company by virtue of being ultimately beneficially wholly-owned by Ms. Cui (a controlling Shareholder) whereby the applicable percentage ratios are over 100%; and

–73– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

(iii) a reverse takeover of the Company under Rule 14.06(6)(b) of the Listing Rules on the basis that the Acquisition (a) constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules; and (b) it involves acquisition of assets from the Vendor (which is an associate of Charm Success, a controlling Shareholder) pursuant to the Sale and Purchase Agreement of which the Initial Agreement and the Supplemental Agreement were entered into within 24 months after Charm Success having gained control (as defined in the Takeovers Code) of the Company, and accordingly, the Acquisition is subject to the approval of the Independent Shareholders at the SGM. At the Board meeting approving the Acquisition on 26 June 2015, Ms. Chai had not been counted as quorum and had abstained from voting in relation thereto.

In addition, as the Acquisition constitutes a reverse takeover of the Company, the Company is being treated as if it were a new [REDACTED] under Rule 14.54 of the Listing Rules. The Acquisition is therefore also subject to the approval of the Listing Committee of a new [REDACTED] made by the Joint Sponsors on behalf of the Company on 31 December 2015. Such new [REDACTED] is required to comply with all the requirements under the Listing Rules, in particular the requirements under Chapters 8 and 9 of the Listing Rules.

In relation to the new [REDACTED] of the Company, the Joint Sponsors have made on behalf of the Company applications to the Stock Exchange from strict compliance with Rules 8.12, 9.09(b), 10.07(1)(a) and 10.08 of Listing Rules in respect of the requirements of sufficient management presence in Hong Kong, no dealing in the Shares of the Company from four clear business days before the expected hearing date by the Listing Committee of the Stock Exchange until [REDACTED] is granted and no further issue of securities by the Company within six months from the date on which [REDACTED] is granted respectively. Please refer to the section headed “Waivers from Strict Compliance with the Listing Rules” in this circular for further details of the applications for waiver and the related waivers granted by the Stock Exchange.

INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of the Company was HK$780,000,000, consisting of 15,600,000,000 Shares of HK$0.05 each, of which 858,450,000 Shares were in issue. The Board proposes to increase the authorised share capital of the Company from HK$780,000,000 divided into 15,600,000,000 shares of HK$0.05 each to HK$1,006,967,647.05, divided into 15,600,000,000 Shares of HK$0.05 each and 4,539,352,941 Convertible Preference Shares of HK$0.05 each by the creation of 4,539,352,941 Convertible Preference Shares. The proposed increase in authorised share capital of the Company is to facilitate the allotment and issue of the Convertible Preference Shares. An ordinary resolution will be put forward at the SGM for the proposed increase in the Company’s authorised share capital. The proposed increase in authorised share capital of the Company is conditional upon the passing of an ordinary resolution by the Shareholders at the SGM.

–74– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

The Board is of the view that the proposed increase in authorised share capital is in the interest of the Shareholders. Since the increase in authorised share capital of the Company relates to the Acquisition, Charm Success and its close associates and any person who has a material interest in the Acquisition are required to abstain from voting on the relevant resolutions to be proposed at the SGM.

AMENDMENT OF BYE-LAWS

Pursuant to Bye-law 9(1) of the Bye-laws, in the event preference shares are issued by the Company, the total nominal value of issued preference shares must not exceed the total nominal value of the issued ordinary shares and the holders of preference shares shall have the same rights as ordinary shareholders as regards receiving of notices, reports and balance sheets and attending general meetings of the Company, and the holders of preference shares shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding-up or sanctioning a sale of the undertaking or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six months in arrear. In order to facilitate the issue of the Convertible Preference Shares on the terms thereof as disclosed in the paragraph headed “The Convertible Preference Shares” above, which do not confer all the rights set out in the existing Bye-law 9(1), it is proposed that Bye-law 9(1) of the Bye-laws be deleted in its entirety.

Moreover, the existing Bye-law 9(3) provides that “the Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued”, where pursuant to the terms of the Convertible Preference Shares, the Company shall not (unless such sanction has been given by the holders of the Convertible Preference Shares) create or issue any shares ranking as regards order in distribution of dividends and return of capital of the Company on a liquidation, winding up or dissolution of the Company in priority to the Convertible Preference Shares, but the Company may create or issue, without obtaining the consent of the holders of the Convertible Preference Shares, shares ranking pari passu in all respects (including as to class) with the Convertible Preference Shares and the existing and further Ordinary Shares. In order to reconcile the difference, the Company also proposed to amend Bye-law 9(3) to provide that:

“Subject to the terms of any preference shares of the Company in issue, the Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued.”

The proposed amendment of Bye-laws is conditional upon the passing of a special resolution by the Shareholders at the SGM.

The Board is of the view that the proposed amendment of Bye-laws is in the interest of the Shareholders. Since the proposed amendment of Bye-laws relates to the Acquisition, Charm Success and its close associates and any person who has a material interest in the Acquisition are required to abstain from voting on the relevant resolutions to be proposed at the SGM.

–75– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

CONTINUING CONNECTED TRANSACTIONS

Upon Completion, member of the Enlarged Group will be involved in several continuing connected transactions. In respect of the agreements entered into by the relevant members of the Enlarged Group relating to the leasing of a motor vehicle, the leasing of office premises in Changchun of Jilin Province and the receiving of the related property management services, these continuing connected transactions are fully-exempt from shareholders’ approval, annual review and all disclosure requirements under Chapter 14A of the Listing Rules. In respect of an existing management agreement entered into between the respective members of the Group and the Target Group, such transaction will cease to be considered as a connected transaction on the part of the Company upon Completion. Please refer to the section headed “Continuing Connected Transactions” in this circular for further details of such continuing connected transactions.

FINANCIAL ADVISER, JOINT SPONSORS, INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

China Galaxy International Securities (Hong Kong) Co., Limited has been appointed as the financial adviser to the Company in relation to the Acquisition.

China Galaxy International Securities (Hong Kong) Co., Limited and Octal Capital Limited have been appointed as the Joint Sponsors to the Company’s new [REDACTED] application. Octal Capital Limited, one of the Joint Sponsors, satisfies the independence criteria applicable to sponsors as set out in Rule 3A.07 of the Listing Rules.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Chan Yuk Tong, Mr. Mei Jianping and Mr. Wei Lidong, has been established to advise the Independent Shareholders in relation to, among others, the Acquisition.

Quam Capital Limited has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in relation to, among others, the Acquisition.

ACQUISITION BY THE GROUP OF THE ENTIRE EQUITY INTEREST IN WAN SHENG

As announced by the Company on 11 September 2015 and 8 October 2015, a wholly-owned subsidiary of the Company entered into an initial agreement and a supplemental agreement respectively, pursuant to which such wholly-owned subsidiary of the Company has conditionally agreed to acquire the entire equity interest in Wan Sheng, which is principally engaged in property development in Jilin City, Jilin Province, for the consideration of RMB150 million (equivalent to approximately HK$180 million) (“Wan Sheng Acquisition”). The attention of the Shareholders is drawn to the two respective announcements issued by the Company on 11 September 2015 and 8 October 2015 and the circular issued by the Company on 28 December 2015 for further details of the Wan Sheng Acquisition. The Wan Sheng Acquisition constitutes a major transaction for the Company under the Listing Rules and is therefore subject to the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing

–76– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

Rules. The Company [will] convene a special general meeting on 18 January 2016 to consider and, if thought fit, pass the relevant resolution in relation to the Wan Sheng Acquisition. Upon completion of the Wan Sheng Acquisition, Wan Sheng will become a subsidiary of the Company and its financial results will be consolidated into those of the Company. For ease of reference of the Shareholders, certain information relating to Wan Sheng is set out in this circular and please refer to Appendix IIIB for the accountants’ report on Wan Sheng for the three years ended 31 December 2014 and the six months ended 30 June 2015, Appendix IV for the management discussion and analysis of the financial information of Wan Sheng and Appendix VIC to this circular for the valuation report of Wan Sheng as at 31 October 2015.

RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group, the Target Group and the Enlarged Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and is not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

SGM

A notice of the SGM to be held at [●]on[●]-day, [●] 2016 at [●], Hong Kong is set out on pages SGM-1 to SGM-4 of this circular for the purpose of considering and, if thought fit, approving (i) the Sale and Purchase Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares and the Conversion Shares, as well as the issue of the Convertible Bonds and the Convertible Preference Shares; (ii) the increase in the authorised share capital of the Company; and (iii) the amendment of the Bye-laws.

A form of proxy for use at the SGM is enclosed. Whether or not you intend to attend the SGM, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the [REDACTED]ofthe Company in Hong Kong, [REDACTED] as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the SGM or any adjournment thereof. Completion and return of the proxy form shall not preclude you from attending, and voting in person at the SGM or any adjournment thereof if you so desire and, in such event, the instrument appointing a proxy will be deemed to be revoked.

Shareholders whose names appear on the register of members of the Company on [●]-day, [●] 2016 shall be entitled to attend and vote at the SGM. In order for the Shareholders to qualify for attending and voting at the SGM, all transfer documents, accompanied by the relevant Share certificates, should be lodged for registration with Tricor Abacus Limited, the Company’s [REDACTED] and [REDACTED] in Hong Kong, at [REDACTED] on or before [●] p.m., [●]-day, [●] 2016.

–77– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE BOARD

VOTING AT THE SGM AND THE BOARD MEETING

Charm Success and its close associates, and any person who has a material interest in the Acquisition are required to abstain from voting on the relevant resolutions to be proposed at the SGM. To the best knowledge of the Company, the Vendor and its close associates (except Ms. Cui) did not hold any Shares in the Company as at the Latest Practicable Date and in the event that the Vendor and its close associates hold any Shares in the Company after the Latest Practicable Date, they will abstain from voting on the relevant resolutions to be proposed at the SGM.

All Shareholders shall be entitled to vote on the relevant resolutions to be proposed at the SGM to approve the increase in the authorised share capital of the Company. Voting on the resolutions at the SGM will be taken by poll.

Save and except Ms. Chai, none of the Directors was considered to have a material interest in the Acquisition under the Bye-laws or the Listing Rules.

RECOMMENDATIONS

The Independent Board Committee, having considered the terms and conditions of the Sale and Purchase Agreement and after taking into account the advice from the Independent Financial Adviser, considers that the terms of the Acquisition are fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole. The Independent Board Committee accordingly recommends that the Independent Shareholders vote in favour of the resolutions to be proposed at the SGM to approve, among others, the Acquisition. The Directors recommend that the Shareholders vote in favour of the resolutions to be proposed to approve, among others, the Acquisition and other resolutions to be proposed at the SGM.

The text of the letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages [80] to [81] of this circular. The text of the letter from the Independent Financial Adviser, containing its advice to the Independent Board Committee and the Independent Shareholders with regard to, among others, the Acquisition and the principal factors and reasons which it has taken into account in arriving at its advice, is set out on pages [82] to [121] of this circular.

FURTHER INFORMATION

Your attention is drawn to other sections of and appendices to this circular, which contain further information on the Group, the Target Group and the Enlarged Group and other information required to be disclosed under the Listing Rules.

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WARNING

THE ACQUISITION IS SUBJECT TO A NUMBER OF CONDITIONS INCLUDING INDEPENDENT SHAREHOLDERS’ APPROVAL, WHICH MAY OR MAY NOT BE FULFILLED. IN ADDITION, THE LISTING COMMITTEE’S APPROVAL TO THE NEW LISTING APPLICATION TO BE MADE BY THE COMPANY MAY OR MAY NOT BE GRANTED. IN THE EVENT THE APPROVAL OF THE NEW LISTING APPLICATION IS NOT GRANTED BY THE LISTING COMMITTEE, THE SALE AND PURCHASE AGREEMENT WILL NOT BECOME UNCONDITIONAL AND THE ACQUISITION WILL NOT PROCEED.

SHAREHOLDERS AND POTENTIAL INVESTORS OF THE COMPANY SHOULD EXERCISE CAUTION WHEN DEALING IN THE SECURITIES OF THE COMPANY.

Yours faithfully, For and on behalf of the Board of Ground Properties Company Limited Ms. Chai Xiu Chairperson

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The following is the text of a letter from the Independent Board Committee to the Independent Shareholders in connection with the Acquisition for inclusion in this circular.

GROUND PROPERTIES COMPANY LIMITED 廣澤地產有限公司 (Incorporated in Bermuda with limited liability) (Stock Code: 989)

[●] 2016

To the Independent Shareholders

Dear Sir or Madam,

(1) VERY SUBSTANTIAL ACQUISITION (2) CONNECTED TRANSACTION (3) REVERSE TAKEOVER INVOLVING A NEW LISTING APPLICATION (4) ISSUE OF CONVERTIBLE BONDS AND CONVERTIBLE PREFERENCE SHARES, AND ISSUE OF SHARES UNDER SPECIFIC MANDATE (5) INCREASE IN AUTHORISED SHARE CAPITAL AND (6) AMENDMENT OF BYE-LAWS

We refer to the circular dated [●] 2016 issued by the Company, of which this letter forms part (the “circular”). Unless otherwise specified, capitalised terms defined in the circular shall have the same meanings when used herein.

The Independent Board Committee has been formed to advise you in relation to the Acquisition and the transactions contemplated under the Sale and Purchase Agreement, including the allotment and issue of the Consideration Shares and the Conversion Shares, as well as the issue of the Convertible Bonds and the Convertible Preference Shares; details of which are set out in the section headed “Letter from the Board” contained in the circular. Quam Capital Limited has been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. The text of the letter of advice from the Independent Financial Adviser containing its recommendations and the principal factors it has taken into account in arriving at its recommendations are set out on pages [82] to [121] of the circular.

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Having considered the terms and conditions of the Sale and Purchase Agreement as well as the advice and recommendations of the Independent Financial Adviser set out in its letter of advice, we consider that the Acquisition is on normal commercial terms which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

On the basis above, we recommend that the Independent Shareholders vote in favour of the resolutions approving the Sale and Purchase Agreement and the transactions contemplated thereunder, including the allotment and issue of the Consideration Shares and the Conversion Shares, as well as the issue of the Convertible Bonds and the Convertible Preference Shares at the SGM.

Yours faithfully, for and on behalf of the Independent Board Committee of Ground Properties Company Limited Mr. Chan Yuk Tong Mr. Mei Jianping Mr. Wei Lidong Independent non-executive Directors

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The following is the full text of a letter of advice from Quam Capital Limited, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of incorporation in this circular, setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition.

[●] 2016

To the Independent Board Committee and the Independent Shareholders

Ground Properties Company Limited Rooms 3505-3506, 35th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Central, Hong Kong

Dear Sirs or Madams,

(1) VERY SUBSTANTIAL ACQUISITION (2) CONNECTED TRANSACTION (3) REVERSE TAKEOVER INVOLVING A NEW LISTING APPLICATION AND (4) ISSUE OF CONVERTIBLE BONDS AND CONVERTIBLE PREFERENCE SHARES, AND ISSUE OF SHARES UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Acquisition, details of which are set out in the “Letter from the Board” (the “Letter from the Board”) contained in the circular issued by the Company to the Shareholders dated [●] 2016 (the “Circular”), of which this letter forms part. Terms used in this letter shall have the same meanings as defined in the Circular unless the context otherwise requires.

On 26 May 2015, the Purchaser, the Vendor and Ms. Cui entered into the Initial Agreement, pursuant to which the Purchaser has agreed to acquire and the Vendor has agreed to sell the [REDACTED] at the Consideration of HK$4,650,000,000. On 3 July 2015, the parties entered into the Supplemental Agreement to, among other things, amend the settlement method of the Consideration. On 22 December 2015, the parties entered into the Second Supplemental Agreement pursuant to which the parties agreed to, among other things, revise the number of [REDACTED] and extend the long-stop date by which the conditions precedent to the Acquisition should be fulfilled or waived, as the case may

–82– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. LETTER FROM THE INDEPENDENT FINANCIAL ADVISER be, to 31 March 2016. Upon Completion, the Target Company and its subsidiaries will become subsidiaries of the Company and their results, assets and liabilities will be consolidated into the consolidated financial statements of the Company. The Target Group is principally engaged in the development, sale and leasing of residential, commercial and tourism properties, as well as property management in Jilin Province of the PRC.

As the highest applicable percentage ratio is over 100%, the Acquisition constitutes a very substantial acquisition of the Company under Chapter 14 of the Listing Rules. Given the Vendor is a connected person of the Company by virtue of being ultimately beneficially wholly-owned by Ms. Cui, a controlling Shareholder, the Acquisition constitutes a connected transaction of the Company under Chapter 14A of the Listing Rules. On the basis that the Acquisition (i) constitutes a very substantial acquisition of the Company; and (ii) it involves acquisition of assets from the Vendor (which is an associate of Charm Success) within 24 months after Charm Success having gained control (as defined in the Takeovers Code) of the Company, the Acquisition constitutes a reverse takeover of the Company under Rule 14.06(6)(b) of the Listing Rule. Accordingly, the Acquisition is subject to the approval of the Independent Shareholders at the SGM. Charm Success and its close associates and any person who has a material interest in the Acquisition are required to abstain from voting on the relevant resolutions to be proposed at the SGM to approve the Acquisition.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Chan Yuk Tong, Mr. Mei Jianping and Mr. Wei Lidong, has been established to advise the Independent Shareholders as to whether the terms of the Sale and Purchase Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote in respect of the Acquisition. As the Independent Financial Adviser, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders in such regard.

As at the Latest Practicable Date, Quam Capital Limited did not have any relationships or interests with the Company or the Vendor that could reasonably be regarded as relevant to the independence of Quam Capital Limited. In the last two years, there was no engagement between the Group and Quam Capital Limited. Apart from normal professional fees paid or payable to us in connection with this appointment as the Independent Financial Adviser, no arrangements exist whereby we had received any fees or benefits from the Company or the Vendor. Accordingly, we are qualified to give independent advice in respect of the Acquisition.

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BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied on (i) the information and facts contained or referred to in the Circular; (ii) the information supplied by the Group and its advisers; (iii) the opinions expressed by and the representations of the Directors and the management of the Group; and (iv) our review of the relevant public information. We have assumed that all the information provided and representations and opinions expressed to us or contained or referred to in the Circular were true, accurate and complete in all respects as at the date thereof and may be relied upon. We have also assumed that all statements contained and representations made or referred to in the Circular are true at the time they were made and continue to be true as at the Latest Practicable Date and all such statements of belief, opinions and intentions of the Directors and the management of the Group and those as set out or referred to in the Circular were reasonably made after due and careful enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors, the management of the Group, and/or the advisers of the Company. We have also sought and received confirmation from the Directors that no material facts have been withheld or omitted from the information provided and referred to in the Circular and that all information or representations provided to us by the Directors and the management of the Group are true, accurate, complete and not misleading in all respects at the time they were made and continued to be so until the date of the Circular.

We consider that we have reviewed sufficient information currently available to reach an informed view and to justify our reliance on the accuracy of the information contained in the Circular so as to provide a reasonable basis for our recommendation. We have not, however, carried out any independent verification of the information provided, representations made or opinion expressed by the Directors and the management of the Group, nor have we conducted any form of in-depth investigation into the business, affairs, operations, financial position or future prospects of the Company, its subsidiaries and associates as well as the companies and assets to be acquired pursuant to the Sale and Purchase Agreement.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our recommendation, we have considered the following principal factors and reasons:

1. Background of and reasons for the Acquisition

1.1 Information on the Group

The Group is primarily engaged in the provision of telecommunications retail sales and management services, property development and management business, as well as property investment.

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The following table summarises the consolidated income statements of the Group for the three financial years ended 31 March 2015 and the six months ended 30 September 2015 as extracted from Appendix IV to the Circular:

For the six months ended For the financial year ended 30 September 31 March 2015 2014 2015 2014 2013 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Unaudited) (Audited) (Audited) (Audited) (Restated) (Restated) (Restated)

Turnover from continuing operations 104,770 42,946 129,494 56,211 63,663 – telecommunication retail sales and management services 104,770 42,480 129,028 46,452 59,871 – property investment – 448 448 9,759 3,792 – property development and management – 18 18 – – Gross profit 49,890 21,832 56,007 39,414 35,101 Profit/(loss) for the year from continuing operations (30,404) (35,914) (22,719) (3,856) 42,409 Profit/(loss) for the year (30,404) (35,914) (22,719) (3,856) 83,226

For the financial year ended 31 March 2014 vs for the financial year ended 31March 2013

Turnover of the Group generated from continuing operations for the financial year ended 31 March 2014 was approximately HK$56.2 million, of which approximately 82.6% was derived from the telecommunications retail sales and management services segment. The Group recorded a drop of approximately 11.7% in its turnover from continuing operations for the financial year ended 31 March 2014 as compared to the previous year, mainly due to the decrease in turnover in the telecommunications retail sales and management services segment resulting from the reduction in the sales of mobile handsets with a lower profit margin, prepaid mobile services and fewer promotional campaigns initiated by the telecommunications operator in Shanghai. In addition to the drop in turnover, the Group also experienced deterioration in its profitability and recorded a loss from continuing operations of approximately HK$3.9 million for the financial year ended 31 March 2014 as compared to a profit from continuing operations of approximately HK$42.4 million in the previous financial year. As disclosed in the annual report of the Company for the year ended 31 March 2014, the deteriorated financial results were mainly attributable to (i) the increase in legal and professional fees associated with the notifiable transactions conducted during the financial year; (ii) the decrease in the fair value gains of investment properties from approximately HK$79.0 million for the financial year ended 31 March 2013 to approximately HK$11.0 million for the financial year ended 31 March 2014; and (iii) the disposal

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gain of the mobile communications services business recognised in the previous financial year and this segment ceasing to generate revenue and profit for the Group during the year.

For the financial year ended 31 March 2015 vs for the financial year ended 31March 2014

For the financial year ended 31 March 2015, turnover of the Group recorded a significant increase of approximately 130.4% to approximately HK$129.5 million and almost the entire amount of the turnover was generated from the telecommunications retail sales and management services segment. Based on the annual report of the Company for the financial year ended 31 March 2015 (the “2015 Annual Report”), the significant increase in turnover from the telecommunications retail sales and management services segment was mainly attributable to the integration and expansion of the Group’s telecommunications retail network and the enrichment of its portfolio of products which contributed to the increase in the sales of the Group’s mobile phones, headphones and other products by approximately 6.27 times during the year. Despite the growth of turnover from the telecommunications retail sales and management services segment, the Group’s turnover from the property investment segment significantly declined from approximately HK$9.8 million for the year ended 31 March 2014 to approximately HK$0.4 million for the year ended 31 March 2015 due to the expiry of the lease contract of the Group’s investment properties in April 2014. As disclosed in the 2015 Annual Report, the Group was negotiating with potential tenants for the leasing. Notwithstanding the overall growth in the Group’s turnover, the Group recorded escalation in loss due to the increase in share-based payment and interest expenses arising from new bank loans and existing promissory notes.

For the six months ended 30 September 2015 vs for the six months ended 30 September 2014

For the six months ended 30 September 2015, turnover of the Group was wholly contributed from the telecommunications retail sales and management services segment, which recorded a substantial increase of approximately 144.0% as compared to the corresponding period in the previous year. Based on the interim report of the Company for the six months ended 30 September 2015 (the “2015 Interim Report”), such increase was mainly attributable to (i) the expansion of the Group’s telecommunication business through acquisitions completed in December 2014 and the increase in revenue from eight new telecommunications retail service stores in Shanghai; (ii) the increase in sales as the exclusive distributor of a renowned United States audio brand’s popular headphone product series in the PRC; and (iii) the new revenue contribution from telecommunications call centre services. However, the Group continued to record loss for the six months ended 30 September 2015, primarily due to the legal and professional fees incurred for the Acquisition during the period. Excluding such legal and professional fees, the net loss for the period would have decreased as compared to the corresponding period in the previous year.

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The following table sets out the key items in the consolidated statements of financial position of the Group as at 31 March 2013, 31 March 2014, 31 March 2015 and 30 September 2015 as extracted from Appendix IV to the Circular:

As at 30 September As at 31 March 2015 2015 2014 2013 HK$’000 HK$’000 HK$’000 HK$’000 (Unaudited) (Audited) (Audited) (Audited)

Investment properties 340,000 340,000 315,000 304,000 Interest in associates 385,540 386,532 383,919 – Entrusted loan receivable 175,552 179,830 – – Pledged bank deposits 198,488 203,326 – – Bank balances and cash 25,873 71,966 38,860 102,099 Interest-bearing borrowings (current and non-current portions) 486,755 497,574 295,000 – Net assets 699,943 727,668 435,775 445,131 Net assets attributable to the Shareholders 700,091 727,816 435,917 439,197

As at 30 September 2015, the investment properties of the Group amounted to HK$340.0 million. Such investment properties represent the office premises in Kowloon Bay, Hong Kong, which were held by the Group for rental income.

Since the completion of the acquisition of Ace Plus Global Limited which in turn holds 35% effective interest in a property project of Jilin Ground Tourism Investment in Changbaishan, Jilin Province, the PRC (the “Changbaishan Property Project”) as well as its management rights in October 2013, the Group’s investments in the Changbaishan Property Project have been recorded as interest in associates of the Company. As at 30 September 2015, the carrying amount of the interests in associates amounted to approximately HK$385.5 million. As disclosed in the 2015 Interim Report, the preparatory works and overall planning of the Changbaishan Property Project have been substantially completed, and the sales model and channels have also been substantially established. Pre-sale of phase 1 of the Changbaishan Property Project is expected to start in 2016 whereas the construction of Phase 1 and the supporting facilities are scheduled to be completed by the end of 2016. In view of the improving standard of living in the PRC, coupled with the implementation of the two-child policy announced in October 2015, the Directors expected that the housing demand in the PRC will continue to grow and maintain sound development in the long run. In addition, the Group will carefully seek more potential property investment opportunities and adhere to its prudent strategy in assessing the potential business opportunities to enrich its investment portfolio.

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Interest-bearing borrowings as at 30 September 2015 comprised secured bank loans of approximately HK$204.0 million, secured entrusted bank loan of approximately HK$175.6 million, secured trust receipt loan of approximately HK$22.2 million and unsecured promissory notes of HK$85 million. As disclosed in the circular of the Company dated 30 September 2013, the Group incurred bank borrowings of HK$210 million by pledging investment properties held by the Group and issued promissory notes in the amount of HK$85 million as the consideration for the acquisition of the entire equity interest in Ace Plus Global Limited. To facilitate the entrusted loan receivable of RMB143.9 million (equivalent to approximately HK$175.6 million) as at 30 September 2015 made to an independent third party, a bank deposit of RMB143.9 million (equivalent to approximately HK$175.6 million) was pledged to secure the entrusted bank loan of approximately HK$175.6 million as at 30 September 2015. The trust receipt loan of approximately HK$22.2 million was secured by a bank deposit of approximately HK$22.9 million made with a bank in the PRC.

1.2 Information on the Target Group

(i) Background of the Target Group

As disclosed in the Letter from the Board, the Target Group is a property developer in Jilin Province of the PRC principally engaged in the development, sale and leasing of residential, commercial and tourism properties, as well as property management. As at the Latest Practicable Date, the Group was interested in 35% of the registered capital of Jilin Ground Tourism Investment, a member of the Target Group.

As at the Latest Practicable Date, the Target Group has a property portfolio of seven property projects in Jilin Province, comprising five residential projects, one integrated leisure and shopping centre and one tourism property project. As at 31 October 2015, the total GFA of these projects and their corresponding total market value attributable to the Target Group were 1,380,412 sq.m and RMB5.7 billion, respectively, based on the valuation report of the Target Properties (the “Valuation Report”) set out in Appendix VIB to the Circular. For further details of the Target Group, its property portfolio and businesses, please refer to the section headed “Business of the Target Group” in the Circular.

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(ii) Financial information of the Target Group

Set out below is a summary of the consolidated financial information of the Target Group for the three years ended 31 December 2014 and the eight months ended 31 August 2015 as extracted from the accountants’ report on the Target Group as set out in Appendix IIIA to the Circular, which was prepared in accordance with the HKFRSs:

For the eight months ended 31 August For the year ended 31 December 2015 2014 2014 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 (Audited) (Unaudited) (Audited) (Audited) (Audited)

Revenue 808,836 635,356 805,611 553,117 530,975 Gross profit 348,876 173,181 204,336 138,860 137,383 Changes in fair value of investment properties 17,732 118,248 151,948 56,673 123,176 Profit before taxation 301,583 231,006 257,352 120,770 201,121 Profit after taxation 159,914 179,137 200,252 90,958 140,716 Profit attributable to owners of the Target Company 103,352 128,065 140,825 67,535 96,364

As at 31 August As at 31 December 2015 2014 2013 2012 RMB’000 RMB’000 RMB’000 RMB’000 (Audited) (Audited) (Audited) (Audited)

Investment Properties 660,000 639,000 342,000 197,000 Properties under development 2,296,136 1,961,384 685,958 1,234,196 Completed properties held for sale 591,979 957,111 853,012 101,846 Cash and bank balances 145,067 107,977 472,177 254,333 Deposits from sale of properties 950,061 1,578,772 1,728,768 1,344,382 Interest-bearing borrowings (current and non-current portions) 782,400 526,600 612,400 300,000

With reference to the section headed “Financial Information of the Target Group” of the Circular, revenue of the Target Group for the three years ended 31 December 2014 were primarily derived from the sales of properties, in particular from the sales of Guangze • Amethyst City — Phase I and Phase II residential project. The revenue from sales of properties for the eight months ended 31 August 2015 was generated from the sales of Guangze

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International Shopping Centre – residential and commercial portion and certain remaining units of Guangze • Amethyst City — Phase I and Phase II residential project.

During the year ended 31 December 2012, the total recognised GFA of the Target Group was 141,310 sq.m., of which there are 109,551 sq.m. of residential units, taking up approximately 77.5% of the total recognised GFA. For the year ended 31 December 2013, revenue of the Target Group increased by approximately 4.2% as compared to that of the previous year, mainly attributable to the increase in the sales of residential units and garages/car parks. However, the gross profit margin of the Target Group decreased from approximately 25.9% for the year ended 31 December 2012 to approximately 25.1% for the year ended 31 December 2013, primarily due to the decrease in the sales recognised in respect of low-rise residential units which were of a higher margin and that there was no sale of commercial units which were of a higher margin during 2013.

Revenue of the Target Group recorded a significant increase of approximately 45.6% for the year ended 31 December 2014, primarily due to the significant growth in the total recognised GFA of both residential and commercial units. The gross profit margin of the Target Group increased from approximately 25.1% for the year ended 31 December 2013 to approximately 25.4% for the year ended 31 December 2014, mainly resulted from (i) the sales of high-rise residential units under Guangze • Amethyst City – Phase II which had increasing selling prices in 2014; and (ii) the sales of the remaining higher margin commercial units under Guangze • Amethyst City – Phase I. For the eight months ended 31 August 2015, the gross profit margin increased to approximately 43.1%, which was mainly resulted from the sales recognised in respect of certain shops at Guangze International Shopping Centre with higher margins as well as the increase in the margin of commercial property sales in respect of Guangze•Amethyst City with its increased average unit selling prices. For the three years ended 31 December 2014 and the eight months ended 31 August 2015, the net profit of the Target Group (excluding changes in fair value of investment properties and related deferred tax) was approximately RMB48.3 million, RMB48.5 million, RMB86.3 million and RMB146.6 million, respectively.

Properties of the Target Group comprised investment properties, properties under development and completed properties for sale. The investment properties held by the Target Group referred to Guangze International Shopping Centre. The significant increase in the value of the investment properties from 31 December 2012 to 31 August 2015 was attributable to (i) the additional costs incurred for the construction of Guangze International Shopping Centre; and (ii) the increase in fair value of the investment properties as a result of potential positive future changes in comparable market prices/market rental rates of Guangze International Shopping Centre upon lease reversion.

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The properties under development of the Target Group include costs of acquiring rights to use certain lands, which are located in the PRC for property development. As at 31 December 2012, the properties under development and were mainly related to (i) Guangze • Amethyst City – Phase II; and (ii) Guangze International Shopping Centre – residential portion, all of which commenced construction in 2012. The decrease in properties under development as at 31 December 2013 was mainly attributable to the transfer of the properties under development to cost of sales (delivered portion) and completed properties for sale (undelivered portion) upon completion of construction of Guangze • Amethyst City – Phase II, partially offset by the continual development of (i) Guangze International Shopping Centre – residential portion; and (ii) the commencement of construction of Guangze • Tudors Palace. The subsequent increase in properties under development as at 31 December 2014 was mainly attributable to (i) the commencement of construction of Guangze Red House; (ii) pre-construction activities of Changbaishan Ground Pine Township International Resort; and (iii) the continual development of Guangze • Tudors Palace and Guangze China House, partially offset by the transfer of the properties under development to completed properties for sale upon completion of construction of Guangze International Shopping Centre – residential portion. The increase in properties under development as at 31 August 2015 was mainly attributable to the continual development/pre-development of (i) Guangze Red House, (ii) Guangze • Tudors Palace, and (iii) Changbaishan Ground Pine Township International Resort.

As at 31 December 2012, completed properties for sales were mainly related to the unsold units of Guangze • Amethyst City – Phase I which completed construction in 2012. The increase in completed properties for sale as at 31 December 2013 was mainly attributable to the completion of Guangze • Amethyst City – Phase II. The increase in completed properties for sale as at 31 December 2014 was mainly attributable to the transfer of Guangze International Shopping Centre – residential and commercial portions and Guangze China House from properties under development upon completion, partially offset by certain units of Guangze • Amethyst City – Phase I and Phase II recognised in profit or loss upon delivery. The decrease in completed properties for sale as at 31 August 2015 was mainly attributable to the property sales recognised on certain units of Guangze International Shopping Centre and sales of certain remaining units of Guangze • Amethyst City – Phase I and Phase II.

1.3 Valuation of the Target Properties

The Target Properties were valued by Savills, an independent property valuer appointed by the Company. The Valuation Report is contained in Appendix VIB to the Circular. We have conducted an interview with Savills regarding its experience in valuing similar property interests in Hong Kong and the PRC, and its independence. Based on our interview with Savills, we understand that Savills is an

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established independent property valuer with a large number of completed assignments acting for listed companies with property interests in, among others, Hong Kong and the PRC. We also understand that the valuer-in-charge of the valuation team has over 22 years’ post-qualification experience in the valuation of properties in the PRC and Hong Kong.

We have reviewed the terms of engagement letter of Savills and noted that the purpose of which is to prepare a property valuation report and provide the Company with the opinion of value on the properties of the Enlarged Group. The engagement letter also contains typical valuation scope usually carried out by independent property valuers. There is no limitation of the scope of work which might have an adverse impact on the degree of assurance given by Savills in the Valuation Report. We also understand from Savills that it has carried out on-site inspections and made relevant enquiries and obtained further information for the purpose of the valuation for the market value of the properties of the Enlarged Group as at 31 October 2015 (the “Valuation”) and no irregularities were noted during the course of the Valuation.

(i) Valuation methodologies

We noted from the Valuation Report that in arriving at the Valuation, Savills has categorised the properties of the Enlarged Group in various groups and adopted the following valuation methodologies to each of the groups:

(a) For the property in Group I, which is held by the Target Group for investment in the PRC, Savills has made reference to the comparable market transactions as available in the market (the “Direct Comparison Approach”) and where appropriate, valued the property on the basis of capitalisation of income with due allowance for reversionary income potential of the property (the “Income Capitalisation Approach”);

(b) For the properties in Group II, which are held by the Target Group for sale in the PRC, Savills has valued such properties by the Direct Comparison Approach assuming sale with the benefit of vacant possession in their existing states by making reference to comparable sale transactions as available in the relevant markets;

(c) For the properties in Group III, which are held by the Target Group under development in the PRC, Savills has valued such properties on the basis that they will be developed and completed in accordance with their latest development proposals. Savills has assumed that all consents, approvals and licenses from relevant government authorities for the development proposals have been obtained without onerous conditions or delays. In arriving at its opinion of values, Savills adopted the Direct Comparison Approach by making reference to comparable sale transactions as available in the relevant markets and have also taken into account

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the costs that will be expended to complete the developments to reflect the quality of the completed developments;

(d) For the property in Group IV, which is held by the Target Group for future development in the PRC, Savills has valued such property by the Direct Comparison Approach assuming sale with the benefit of vacant possession;

(e) For the property in Group V, which is to be acquired by the Target Group in the PRC, Savills has assigned no commercial value to the property as the Target Group has not obtained any valid title documents; and

(f) For the properties in Group VI, which are leased by the Target Group in the PRC, Savills has assigned no commercial values to such properties due to either the prohibition against assignment or sub-letting or otherwise due to the lack of substantial profit rents and/or the short term nature of the respective leases.

The properties fall under Groups I, II, III, IV and V categorised in the Valuation Report are owned by or to be acquired by the Target Group.

Based on the above, we have discussed with Savills on the rationale of adopting the different valuation methodologies for valuing the different categories of properties of the Target Group. According to Savills, the Direct Comparison Approach is the most appropriate valuation method for assessing the market values of the properties in Groups II and IV as these lands and properties are for residential and commercial purpose with readily available market price information. As for the property in Group I which is primarily commercial property, Savills primarily adopts the Direct Comparison Approach and where appropriate, the Income Capitalisation Approach, having regard to the income driven nature of these properties as well as readily available comparable transacted deals as a reference for the Direct Comparison Approach. For properties in Group III, which are the properties held by the Target Group under development, Savills values such properties on the basis that they will be completed according to the latest development proposals as provided to them by adopting the Direct Comparison Approach to derive the market value of the subject properties as if completed and then deducting the outstanding construction costs and other expenses to arrive at the final market value of the subject properties.

After considering the reasons for Savills’ choice of adopting various valuation methodologies for valuing the different properties held by the Target Group, we consider that the valuation methodologies adopted by Savills are reasonable and acceptable in establishing the market values of the Target Properties as at 31 October 2015.

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(ii) Valuation bases and assumptions

In arriving at the appraised value for the residential and commercial properties using the Direct Comparison Approach, Savills generally starts the process by collecting and analysing the recent transactions in the subject properties and market comparables located in the vicinity of the subject properties. The collected comparables were then adjusted to reflect the difference between the comparables and the subject properties in terms of, among others, time, location, size and quality.

The appraised value for the property in Group I was arrived by adopting a mixture of the Direct Comparison Approach and the Income Capitalisation Approach. Under the Income Capitalisation Approach, the income stream adopted was based on the existing unexpired contractual tenancies of the properties, whilst vacant units are assumed to be let at their respective market rents as at the valuation date. Upon expiry of the existing tenancies, each unit was assumed to be let at its market rent as at the valuation date. Savills then applied a capitalisation rate which is based on the yields achieved in market sales transactions and Savills’ judgment of the market expectations of property investors, to revert the market rents of each property to valuation date. Going hand-in-hand with the Income Capitalisation Approach, the Direct Comparison Approach was used to support the appraised value for the commercial property in Group I. In this regard, data from recent comparable transactions were collected and analysed by Savills. The collected comparables were then adjusted to take account of the discrepancies between the property and collected comparables, which include, among others, time, location, size and quality.

As for the properties under development in Group III, Savills first adopted the Direct Comparison Approach to derive the market value of the subject properties as if completed and then deducted the relevant construction costs and other expenses to arrive at the final market value of the subject properties. Relevant construction costs and other expenses, which were deducted from the market values of the subject properties as if completed to arrive at the appraised value of the subject properties, were estimated outstanding construction costs and expenses to complete the subject properties. Savills confirmed that they have assessed the reasonableness of the total construction costs for the relevant property development projects provided by the management of the Target Group.

After taken into account the above, we consider that the bases and assumptions adopted by Savills for the valuation methodologies as discussed above are reasonable and in line with market practice.

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1.4 Outlook of the real estate market in Jilin Province

The section headed “Industry Overview” as set out in Appendix I to the Circular has already included a comprehensive outline of the overview of the PRC and the Jilin Province, which we highlighted the summaries as follow:

(i) GDP per capita growth in Jilin Province has been increasing at a rate higher than the national level and the per capital disposable income of urban household in Jilin Province recorded a CAGR of approximately 10.6% from 2009 to 2014;

(ii) Residential investment in Jilin Province continued to grow from 2009 and 2011 until the market witnessed decrease in growth rate since 2012 in view of the restrictive regulatory policies introduced by the Chinese Government came into effect nationwide in 2011 to cool down the real estate market; and

(iii) Sales revenue from residential properties sold in Jilin Province grew significantly from 2009 to 2011 and remained above RMB65 billion since 2010 to 2014.

We noted that challenges are faced by the PRC real estate market, namely (i) the increasing level of accumulated inventory in the residential property market; (ii) the continuous impact on demand as a result of the real estate policy control promulgated by the Chinese Government; and (iii) the increase in land cost and construction cost which shrank the profitability of the real estate developers. Nonetheless, we also noted that the real estate market in Jilin Province has the following key drivers:

(i) Urbanisation in Jilin Province is increasing steadily, resulting in persistent demand for residential property;

(ii) Growth of disposable income and purchasing power of urban residents is expected to drive purchase of residential property; and

(iii) Increasing demand for real estate ownership driven by the housing needs of newly married couples which showed an increasing trend from 2009 to 2014.

Based on the foregoing, we consider that while the real estate market in the PRC might face certain challenges, optimistic factors exist in the real estate market of Jilin Province which may in turns support the business and financial performance of the Target Group in the future.

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1.5 Reasons for and benefit of the Acquisition

We have discussed with the management of the Group in respect of the reasons for the Acquisition. As disclosed in the Letter from the Board, the Acquisition is considered to be in the interests of the Company and the Shareholders as a whole due to the following reasons:

(i) The Target Group is already generating profit

For the year ended 31 December 2013 and 2014 and eight months ended 31 August 2015, the Target Group generated net profit attributable to owners of the Target Company of approximately RMB67.5 million, RMB140.8 million and RMB103.4 million respectively. It is expected that the Acquisition would help the Enlarged Group to improve its profitability. In addition, the Group will also achieve diversification, whereupon its revenue and income can be diversified from its telecommunications retail sales and management services segment.

(ii) Following Completion, the Enlarged Group can leverage on the platform of the Target Group to accelerate property development business and create additional value for its Shareholders

The existing property portfolio of the Group is only made up of its Hong Kong based investment properties and its 35% interest in Jilin Ground Tourism Investment which is also a member of the Target Group (with the remaining 65% of its interests being held by the Target Group). Despite ongoing challenges in the PRC property market, the Group believes that long term demand for housing in the PRC will be sustainable due to the continual growth in the PRC economy, the continual urbanisation process, the general increasing trend of disposable income and purchasing power of PRC residents, as well as demand for real estate ownership driven by housing needs of newly married couples in the PRC. The Target Group has been focusing in the property development market in Jilin Province since 2010 and has built up a portfolio of property projects. The Acquisition would allow the Group to fast track the growth of the scale of its property development and management business. Following Completion, the Directors believe that the Company can leverage on the platform of the Target Group to accelerate property development business particularly in Jilin Province.

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(iii) The Enlarged Group will have a larger asset base, thereby stronger capacity to raise funds for its long term development

(iv) The Target Group is a local property developer in Jilin Province and its management team and track record can help the Enlarged Group to further develop its property development and management business in Jilin Province and better position the Enlarged Group to expand into other provinces when the opportunity arises

The Target Group was established in 2010 and has built up a balanced portfolio of residential, commercial and tourism properties in Jilin Province. According to the Vendor, in building its property portfolio, the management of the Target Group has been successful in acquiring land at locations which the management of the Target Group believes to be suitable for property project development in Jilin Province. As such, the Directors believe that the Acquisition would help the Enlarged Group to build and scale up its presence in Jilin Province significantly. In addition, the Directors believe that leveraging on the track record and experience of the Target Group in Jilin Province, the Enlarged Group can be in a better position to expand into other provinces in the PRC as and when opportunity arises.

As noted from the section headed “Business of the Target Group” of the Circular, Ground Real Estate, the intermediate holding company within the Target Group, was recognised as one of the 200 top property development enterprises in China (2015中國房地產開發企業200強) in March 2015 and ranked 116th in the “China’s Property Developers with the Most Comprehensive Strength 2015” (2015中國房地產綜合實力排名) in March 2015. Since the inception of the Ground Real Estate Group in 2010, the business focus of the Ground Real Estate Group has been the property development market in Jilin Province of the PRC. Despite being the first commercial property project of the Target Group, Guangze International Shopping Centre has become a new landmark of Baishan City (白山市) of Jilin Province since its grand opening in January 2015.

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Leveraging on the reasons above, coupled with the possible drivers of the real estate market in Jilin Province as illustrated in the sub-section headed “Outlook of the real estate market in Jilin Province” above and our review on the financial information on the Group and the Target Group as discussed in the sub-sections headed “Information on the Group” and “Information on the Target Group” above, we concur with the Directors’ view that the Target Group will contribute revenue to the Group, improve its profitability and enlarge its asset base in the future, as well as to build and scale up its presence in Jilin province.

As stated in the 2015 Annual Report regarding the Group’s prospects, the Group will strive to diversify business development and will continue to expand its property development and management business and seek property investment opportunities with growth potential, so as to achieve sustainable and stable growth. Having considered that (i) the Group’s telecommunications retail sales and management services segment contributed a dominant proportion of turnover to the Group; (ii) the Group has been generally loss-making for recent financial years; (iii) the Target Group has been generating revenue and profit from its property development projects; (iv) the existing property portfolio of the Group is only made up of its Hong Kong based investment properties and its 35% interest in Jilin Ground Tourism Investment; and (v) the Ground Real Estate Group has focused in the property development market in Jilin Province since 2010, and has built up a portfolio of property projects, we concur with the Directors’ view that the Acquisition would fast track the pace of growth and scale of its property development and management business and that the Acquisition is in line with the business plan of the Group to diversify business development and to expand its property development and management business.

Moreover, we noted from the section headed “Directors and Senior Management of the Enlarged Group” of the Circular that the management of the Enlarged Group have extensive experience in property development and management in the PRC. In particular, Ms. Chai, an executive Director and the chairperson of the Board, has over 15 years of working experience primarily in the property and dairy product industries in the PRC; and Mr. Wang Guanghui, an executive Director, has over 23 years of experience in the real estate industry in the PRC, specialising in construction project development, planning and management. In this relation, we concur with the Directors’ view that the experience of the core management team of the Enlarged Group may contribute to the business sustainability of the Enlarged Group in the property development industry in the PRC.

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To form a thorough understanding on the future development plan of the Target Group, Shareholders are also advised to refer to the section headed “Business of the Target Group” of the Circular with regard to the proposed business strategies and development plans of the Target Group.

2. Principal terms of the Sale and Purchase Agreement

2.1 The Sale and Purchase Agreement

On 19 March 2015, the Company published the first announcement (the “First Announcement”) in relation to the feasibility of an acquisition of equity interest in a BVI company, which together with its subsidiaries, is principally engaged in property development business in the PRC. On 26 May 2015, the Purchaser, the Vendor and Ms. Cui entered into the Initial Agreement, pursuant to which the Purchaser has agreed to acquire and the Vendor has agreed to sell the [REDACTED] at the Consideration of HK$4,650,000,000. On 3 July 2015, the parties entered into the Supplemental Agreement to, among other things, amend the settlement method of the Consideration. On 22 December 2015, the parties entered into the Second Supplemental Agreement pursuant to which the parties agreed to, among other things, revise the number of [REDACTED] and extend the long-stop date by which the conditions precedent to the Acquisition should be fulfilled or waived, as the case may be, to 31 March 2016.

Upon Completion, the Target Company and its subsidiaries will become subsidiaries of the Company and their results, assets and liabilities will be consolidated into the consolidated financial statements of the Company.

2.2 Conditions precedent

Please refer to the paragraph headed “Conditions precedent” in the Letter from the Board for details of the conditions precedent to the Acquisition.

Completion of the Acquisition shall take place on the Completion Date, being the second Business Day after the fulfillment (or waiver, as the case may be) of the conditions precedent to the Acquisition, or such other date as the Vendor and the Purchaser may agree in writing. It is currently expected that Completion shall take place no later than 31 March 2016.

2.3 Consideration

According to the Letter from the Board, the Consideration was arrived at after arm’s length negotiations between the Group and the Vendor with reference to (i) the net asset value of the Target Group attributable to the Vendor; (ii) the appreciation of Target Properties over their book value; (iii) the capital injection to the Target Company subsequent to 31 August 2015; (iv) the estimated amount of relevant business tax, land appreciation tax and income tax that will be payable upon the sale of the Target Properties; and (v) the estimated development and construction costs that are expected to be incurred for the Target Properties (excluding the Group’s Interests) subsequent to 31 August 2015.

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In assessing the fairness and reasonableness of the Consideration, we have considered the adjusted net asset value (“Adjusted NAV”) based on the audited consolidated net asset value of the Target Group attributable to the Vendor as at 31 August 2015 prepared in accordance with the HKFRSs as extracted from the accountants’ report on the Target Group set out in Appendix IIIA to the Circular with the adjustments set out below:

RMB million

Audited consolidated net asset value of the Target Group attributable to the Vendor as at 31 August 2015 (Note 1) 752 Add: Appreciation of the Target Properties (Note 2) 3,341 Capital injection into the Target Company (Note 3) 400 Less: Estimated amount of business tax, land appreciation tax and income tax that will be payable upon the sale of the Target Properties (537) Estimated development and construction costs that are expected to be incurred subsequent to 31 August 2015 (236)

3,720 (equivalent to HK$4,650 Adjusted NAV million)

Notes:

1. Extracted from the accountants’ report on the Target Group as set out in Appendix IIIA to the Circular.

2. Represented the difference between the book value of the Target Properties (after deducting the Group’s interests) as at 31 August 2015 and the estimated value of the Target Properties from the Company’s management (after deducting the Group’s interests) having consulted with Savills on the valuation methodology, market condition, and other relevant matters which, in Savills’ experience, might affect the Target Properties value. For details of the assessment of the valuation methodologies, bases and assumptions adopted by Savills in valuing the Target Properties, please refer to the paragraph headed “Valuation of the Target Properties” above.

3. Represented a capital injection of RMB400 million into the Target Company from the Vendor made subsequent to 31 August 2015 to finance the acquisition of Ground Real Estate Group as part of the reorganisation of the Target Group.

The Company, when negotiating the Consideration, has taken into account the relevant estimated effect of future taxes attributable to the sale of the Target Properties, including business tax, land appreciation tax and income tax that will be payable upon the sale of the Target Properties. Based on our discussion with the management of the Company, the future tax effect is estimated based on the prevailing government tax policies and current valuation of the Target Properties. The actual amount of tax payable may differ from the estimates for reason of, inter alia, changes in government tax policies (including tax rates) and the actual selling prices of the Target Properties. In view of the understanding above, we are of the view that the basis of calculation of the future tax effect is reasonable.

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The Company has also taken into consideration the estimated development and construction costs that are expected to be incurred for the Target Properties (excluding the Group’s Interests) subsequent to 31 August 2015. We have discussed with the management of the Company regarding the estimation of these development and construction costs and were advised that the amount were mainly estimated based on, among other things, the latest progress and construction schedule of the property projects of the Target Group which were still under development at the time negotiating the Consideration and the development and construction contracts entered into by the Target Group in respect of such property projects. We have also discussed with Savills regarding such estimated development and construction costs and were advised that these costs are related to the Target Properties under development which are categorised under Group III of properties in the Valuation Report. Savills confirmed that they had assessed the reasonableness of the total construction costs for the relevant property development projects provided by the management of the Target Group.

Taking into account that (i) the Consideration represented the reassessed Adjusted NAV, which we consider to be a commonly adopted approach in assessing the fairness of the valuations of property investment and development companies; and (ii) the valuation methodologies, bases and assumptions in establishing the market values of the Target Properties are reasonable and acceptable, we consider the Consideration to be fair and reasonable.

2.4 Payment of the Consideration

As stated on the Letter from the Board, the Consideration of HK$4,650,000,000 is payable to the Vendor at Completion and is to be satisfied in the following manner:

(i) as to HK$500,000,000 by way of issue of the Convertible Bonds to the Vendor upon Completion;

(ii) as to HK$3,858,450,000 by way of allotment and issue of the Convertible Preference Shares at the price of HK$0.85 per Convertible Preference Share to the Vendor upon Completion; and

(iii) as to HK$291,550,000 by way of allotment and issue of the Consideration Shares at the Issue Price of HK$0.85 per Consideration Share to the Vendor upon Completion.

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According to the Letter from the Board, the split between Convertible Preference Shares and Convertible Bonds was determined after arm’s length negotiations between the Group and the Vendor after taking into account the preference of the Vendor for the non-cash part of the Consideration to be settled by the Convertible Bonds. However, after considering the ability of the Group to service the interest payment of the Convertible Bonds, and the relatively lower amount of fixed dividend entitlement of the Convertible Preference Shares, which in turn would preserve its capital for future development of the Enlarged Group and reduce the potential impact on cashflow of the Enlarged Group should the Convertible Bonds be redeemed, the Group and the Vendor agreed to settle part of the Consideration by the issuance of the Convertible Preference Shares.

2.5 Principal terms of the Convertible Bonds

Pursuant to the terms of the Sale and Purchase Agreement, the Company will issue the Convertible Bonds in the principal amount of HK$500,000,000 to the Vendor to satisfy part of the Consideration upon Completion. As confirmed by the Directors, the terms of the Convertible Bonds have been negotiated on an arm’s length basis and the principal terms of which are summarised as follows:

Issuer: the Company

Interest rate: 2% per annum payable semi-annually in arrears in each year

Maturity date: the 5th anniversary of the issue date of the Convertible Bonds

CB Conversion Price: HK$0.85 per CB Conversion Share (subject to adjustments)

Aggregate principal amount: HK$500,000,000

Assuming there will be no issue or repurchase of Shares from the Latest Practicable Date, upon the exercise in full of the conversion rights attaching to the Convertible Bonds at the CB Conversion Price, the Company will allot and issue an aggregate of 588,235,294 CB Conversion Shares, representing (i) approximately 68.5% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 32.9% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and the CB Conversion Shares but before issue of the CPS Conversion Shares; and (iii) approximately 9.3% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and all Conversion Shares.

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Comparison with other transactions involving issue of convertible bonds/notes as consideration

In order to evaluate the fairness and reasonableness of the terms of the Convertible Bonds, we have identified to the best of our knowledge and as far as we are aware of, from 1 March 2015 up to the Last Trading Day, being a period of approximately three months, 12 transactions by companies listed on the Stock Exchange which involved the issue of convertible bonds/notes as consideration for acquisitions (the “CB Comparables”). Shareholders should note that the businesses, operations and prospects of the Company are not the same as the CB Comparables. However, for the purpose of providing Shareholders with a general reference for common recent market practice of companies listed on the Stock Exchange in transactions which involved the issue of convertible bonds/notes as consideration for acquisitions, we consider the CB Comparables to be fair and representative. The table below summarises our relevant findings:

Premium/(Discount) of the conversion price over/(to) the closing price per share on the last trading day on/ priortothe announcement/ the date of agreement in relation to the respective issue of Date of Annual convertible announcement Company name Stock code interest rate notes/bonds (%) (Approximate %)

10 March 2015 Madex International 231 0 (9.91) (Holdings) Limited

11 March 2015 Larry Jewelry International 8351 7 (82.35) Company Limited

1 April 2015 China Precious Metal 1194 0 26.67 Resources Holdings Co., Ltd.

15 April 2015 Greater China Holdings 431 0 (20.15) Limited

15 April 2015 Alibaba Health Information 241 2 (14.30) Technology Limited

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17 April 2015 SMI Culture Group Holdings 2366 0 1.69 Limited

20 April 2015 CIAM Group Limited 378 8 16.44

27 April 2015 Karrie International Holdings 1050 1 19.23 Limited

30 April 2015 Chinese Food and Beverage 8272 0 (43.14) Group Ltd.

30 April 2015 China HealthCare Holdings 673 0 (48.70) Limited

4 May 2015 China City Infrastructure 2349 0 50.00 Group Limited

7 May 2015 Universe International 1046 0 7.14 Holdings Limited

Maximum 8 50.00

Minimum 0 (82.35)

Average 1.5 (8.12)

The Convertible 2 (35.11) Bonds (Note)

Source: Website of the Stock Exchange

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Note: The discount of approximately 35.11% is calculated based on the closing price of the Shares on the Last Trading Day. Should the closing price of the Shares on the date of the First Announcement is being used, the CB Conversion Price represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement.

(i) The CB Conversion Price

The CB Conversion Price of HK$0.85 per Share was determined after arm’s length negotiations between the Group and the Vendor, with reference to the average closing prices of the Shares from 19 March 2015 (being the date of the First Announcement) to 22 May 2015 (being the Last Trading Day). The CB Conversion Price represents:

(a) a premium of approximately 3.66% over the closing price of HK$0.82 per Share as quoted on the Stock Exchange on 19 March 2015, being the date of the First Announcement;

(b) a discount of approximately 35.11% to the closing price of HK$1.31 per Share as quoted on the Stock Exchange on 22 May 2015, being the Last Trading Day;

(c) a discount of approximately 15.51% to the average closing price of HK$1.006 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including Last Trading Day;

(d) a discount of approximately 9.67% to the average closing price of HK$0.941 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including Last Trading Day;

(e) a premium of approximately 4.29% over the unaudited consolidated net assets attributable to equity holders of the Company of approximately HK$0.815 per Share as at 30 September 2015, based on the unaudited consolidated net assets according to the 2015 Interim Report and the number of issued Shares as at the Latest Practicable Date.

As noted from the above table regarding our findings on the CB Comparables, the conversion prices of the CB Comparables had an average of a discount of approximately 8.12% and ranged from a discount of approximately 82.35% to a premium of 50.00% to/over the respective closing prices of their shares as at the last trading days on/prior to the release of the relevant announcements/the dates of agreements in relation to the respective acquisitions involving the issue of convertible bonds/notes as consideration. The CB Conversion Price, which represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First

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Announcement and a discount of approximately 35.11% to the closing price of the Shares on the Last Trading Day, falls within the range of the CB Comparables.

Based on the above and having taken into consideration that the CB Conversion Price represents a premium over the unaudited consolidated net assets attributable to equity holders of the Company per Share as at 30 September 2015, we consider that the CB Conversion Price is fair and reasonable so far as the Independent Shareholders are concerned.

(ii) Annual interest rate

The Convertible Bonds bear an annual interest rate of 2%. We noted that the CB Comparables bear annual interest rates ranging from nil to 8% with an average of approximately 1.5%. Hence, the annual interest rate of the Convertible Bonds falls within the range of the CB Comparables.

2.6 Principal terms the Convertible Preference Shares

Pursuant to the terms of the Sale and Purchase Agreement, the Company will issue 4,539,352,941 Convertible Preference Shares to the Vendor to satisfy part of the Consideration upon Completion.

The terms of the Convertible Preference Shares have been negotiated on an arm’s length basis, principal terms of which are summarised as follows:

Issuer: the Company

Nominal value: HK$0.05 each

CPS Conversion HK$0.85 per CPS Conversion Share (subject to Price: adjustments)

Notional value: HK$0.85, being the price at which each Convertible Preference Share is to be initially issued

Conversion ratio: the number of CPS Conversion Shares to be issued upon conversion shall be determined by dividing the aggregate notional value of the Convertible Preference Shares to be converted by the prevailing CPS Conversion Price

Conversion period: the period commencing from the business day immediately after the date of allotment and issue of the Convertible Preference Shares and ending on the date of all Convertible Preference Shares have been converted or purchased in full (or such earlier date as may be required under the laws)

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Fixed dividend: holder of each Convertible Preference Share shall be entitled to receive, out of funds legally available therefor, an accrued and cumulative fixed dividend commencing on the issue date of the Convertible Preference Share on a yearly basis at a rate of 0.2% of the nominal value of HK$0.05 of each Convertible Preference Share outstanding (subject to appropriate adjustment in the event of any share dividend, share split, combination or other similar recapitalisation with respect to the Convertible Preference Shares), in priority to any dividend in respect of any other class of shares in the capital of the Company, which shall be paid in cash annually in arrears within 30 days after the conclusion of each annual general meeting of the Company; and the fixed dividend shall be accrued and accumulated to the following year in case the Company has insufficient legal funds available for distribution in a particular year

Assuming there will be no issue or repurchase of Shares from the Latest Practicable Date, upon the exercise in full of the conversion rights attaching to the Convertible Preference Shares at the conversion ratio based on the initial CPS Conversion Price, the Company will allot and issue an aggregate of 4,539,352,941 CPS Conversion Shares, representing (i) approximately 528.8% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 79.1% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and the CPS Conversion Shares but before issue of the CB Conversion Shares; and (iii) approximately 71.7% of the issued share capital of the Company as enlarged by allotment and issue of the Consideration Shares and all Conversion Shares.

Comparison with other transactions involving issue of convertible preference shares

In order to evaluate the fairness and reasonableness of the terms of the Convertible Preference Shares, we have tried to identify transactions by companies listed on the Stock Exchange which involved the issue of convertible preference shares as consideration for acquisitions from 1 March 2015 up to the Last Trading Day. However, only one transaction met the aforementioned criteria. In this regard, we have broadened our search to include transactions in relation to the issue and subscription of convertible preference shares with defined terms by companies listed on the Stock Exchange from 1 December 2014 up to the Last Trading Day, being a period of approximately six months. To the best of our knowledge and as far as we are aware of, six transactions met the said criteria (the “CPS Comparables”). Shareholders should note that the businesses, operations and prospects of the Company are not the same as the CPS Comparables. The table below summarises our relevant findings:

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Premium/(Discount) of the conversion/ issue price over/ (to) the closing price per share on the last trading day on/prior to the announcement/the date of agreement in relation to the respective issue of Date of convertible announcement Company name Stock code Dividend rate preference shares (Approximately %)

18 December 2014 Lajin Entertainment 8172 nil (71.40) Network Group Ltd. (formerly known as China Star Cultural Media Group Limited)

20 January 2015 CITIC Limited 267 same rate as the 3.60 ordinary shares on an as converted basis

2 February 2015 Beijing Enterprises 1250 same rate as the (43.57) Clean Energy ordinary shares on Group Ltd. an as converted (formerly known as basis Jin Cai Holdings Company Limited)

27 February 2015 Joy City Property 207 same rate as the (5.60) Limited ordinary shares on an as converted basis

2 April 2015 North Asia Resources 61 not less than any 0.00 Holdings Limited other class of shares

15 April 2015 EDS Wellness 8176 nil (93.55) Holdings Limited

Maximum 3.60

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Minimum (93.55)

Average (35.09)

The Convertible 0.2% per annum of the nominal value (35.11) Preference Shares (Note)

Source: Website of the Stock Exchange

Note: The discount of approximately 35.11% is calculated based on the closing price of the Shares on the Last Trading Day. Should the closing price of the Shares on the date of the First Announcement is used, the CPS Conversion Price represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement.

Comparison with convertible preference shares issued by other issuers engaged in property development business

Apart from extending our search to transactions in relation to the issue and subscription of convertible preference shares, we have also searched for companies listed on the Stock Exchange which are principally engaged in property development and investment in the PRC with outstanding convertible preference shares in issue as at the Last Trading Day. On a best effort basis and to the best of our knowledge, we have identified six companies that met the said criteria (“CPS Industry Comparables”). Shareholders should note that the businesses, operations and prospects of the

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Company are not identical to those of the CPS Industry Comparables. The table below summarises our relevant findings:

Premium/(Discount) of the conversion/ issue price over/ (to) the closing price per share on the last trading day on/prior to the announcement/the date of agreement in relation to the respective issue of convertible Company name Stock code Principal activities Dividend rate preference shares (Approximately %)

Cosmopolitan 120 Property development same rate as the ordinary (83.60) International and investment, and shares on an as Holdings Ltd. financial assets and converted basis other investments.

Yueshou 1191 Property development in same rate as the ordinary (18.03) Environmental the PRC and forestry shares on an as Holdings Ltd. plantation operations converted basis in the Philippines.

Joy City Property 207 Investment holding, same rate as the ordinary (42.90) Ltd. property investment shares on an as and development, converted basis property management and hotel operations.

Greenland Hong 337 Property development, same rate as the ordinary (50.30) Kong Holdings property and hotel shares on an as Ltd. investment, property converted basis management and education.

Beijing Capital 1329 Property investment and same rate as the ordinary (20.80) Juda Ltd. development. shares on an as converted basis

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Premium/(Discount) of the conversion/ issue price over/ (to) the closing price per share on the last trading day on/prior to the announcement/the date of agreement in relation to the respective issue of convertible Company name Stock code Principal activities Dividend rate preference shares (Approximately %)

Overseas Chinese 3366 Comprehensive 5 % per annum of initial 1.25 Town (Asia) development business issue price of HK$4.05 Holdings Ltd. include development each and operation of tourism theme park, developed and sold residential properties, and development and management of properties, manufacture and sale of paper cartons and products.

Maximum 1.25

Minimum (83.60)

Average (35.73)

The Convertible 0.2% per annum of the (35.11) Preference nominal value (Note) Shares

Source: Website of the Stock Exchange

Note: The discount of approximately 35.11% is calculated based on the closing price of the Shares on the Last Trading Day. Should the closing price of the Shares on the date of the First Announcement is used, the CPS Conversion Price represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement.

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(i) The CPS Conversion Price

The CPS Conversion Price is the same as the CB Conversion Price and was determined on the same basis, being arm’s length negotiations between the Group and the Vendor with reference to the average closing prices of the Shares from 19 March 2015 (being the date of the First Announcement) to 22 May 2015 (being the Last Trading Day).

As noted from the above table for our findings on the CPS Comparables, the conversion or issue prices of the CPS Comparables had an average of a discount of approximately 35.09% and ranged from a discount of approximately 93.55% to a premium of approximately 3.60% to/over the respective closing prices of their shares as at the last trading days on/prior to the release of the relevant announcements/the dates of agreements in relation to the respective issue of convertible preference shares. The CPS Conversion Price, which represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement and a discount of approximately 35.11% to the closing price of the Shares on the Last Trading Day, was higher than that of all the CPS Comparables and represented a close approximate to the average of the CPS Comparables, respectively.

As noted from the above table for our findings on the CPS Industry Comparables, the conversion or issue prices of the CPS Industry Comparables had an average of a discount of approximately 35.73% and ranged from a discount of approximately 83.60% to a premium of approximately 1.25% to/over the respective closing prices of their shares as at the last trading days on/prior to the release of the relevant announcements/the dates of agreements in relation to the respective issue of convertible preference shares. The CPS Conversion Price, which represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement and a discount of approximately 35.11% to the closing price of the Shares on the Last Trading Day, was also higher than that of all the CPS Industry Comparables and represented a close approximate to the average of the CPS Industry Comparables, respectively.

Based on the above and having taken into consideration that the CPS Conversion Price represents a premium over the unaudited consolidated net assets attributable to equity holders of the Company per Share as at 30 September 2015, we consider that the CPS Conversion Price is fair and reasonable so far as the Independent Shareholders are concerned.

(ii) Dividend rate

The Convertible Preference Shares bear a fixed dividend rate of 0.2% per annum of the nominal value of the Convertible Preference Shares of HK$0.05 each. Based on the above tables regarding our findings on the CPS Comparables and the CPS Industry Comparables, we noted that amongst the

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twelve companies in the CPS Comparables and CPS Industry Comparables in aggregate, (i) eight of them bear a dividend rate being the same as the corresponding ordinary shares on an as converted basis; (ii) one of them bear a dividend rate of being not less than any other class of shares; (iii) one of them bear a dividend rate of 5 % per annum of initial issue price; and (iv) two of them had nil dividend rate. Having considered that the majority of the CPS Comparables and the CPS Industry Comparables bear a floating rate of dividend being the same as the corresponding ordinary shares or being not less than any other class of shares, meaning that the payment of any dividend on such convertible preference shares is subject to the discretion of the boards of the CPS Comparables and the CPS Industry Comparables to declare any dividend on their ordinary shares or not; and (ii) amongst the CPS Comparables and the CPS Industry Comparables, only one of them bears a fixed rate of dividend of 5% per annum of initial issue price of HK$4.05 each, it appears that the comparison between the dividend rate of the Convertible Preference Shares with those of the CPS Comparables and the CPS Industry Comparable may not be meaningful.

Notwithstanding the above, we noted that the dividend rate of 0.2% of the nominal value of the Convertible Preference Shares of HK$0.05 is substantially lower than the annual interest rate of the Convertible Bonds of 2% and the interest rate of the Group’s borrowings of no less than 2.88% as at 31 March 2015 according to the 2015 Annual Report. Based on the aggregate principal amount of the Convertible Bonds of HK$500,000,000 and the annual interest rate of 2%, it is expected that the Company will be required to service an annual interest payment of HK$10 million for the Convertible Bond. On the other hand, based on the nominal value of the Convertible Preference Shares of HK$0.05 each, the dividend rate of 0.2% of the nominal value of the Convertible Preference Shares and the 4,539,352,941 Convertible Preference Shares to be issued, it is expected that the Company will only be required to service an annual dividend of approximately HK$450,000 for the Convertible Preference Shares. Given that (i) the dividend rate of the Convertible Preference Shares is substantially lower than the interest rate of the Convertible Bonds and the Group’s borrowings as at 31 March 2015; and (ii) the expected annual dividend payment under the Convertible Preference Shares is relatively insignificant to the Enlarged Group, we consider that the dividend rate of the Convertible Preference Shares is acceptable.

2.7 The Consideration Shares

Pursuant to the terms of the Sale and Purchase Agreement, the Company will issue 343,000,000 Consideration Shares to the Vendor upon Completion to satisfy part of the Consideration. The 343,000,000 Consideration Shares represent (i) approximately 40.0% of the issued share capital of the Company as at the Latest Practicable Date; (ii) approximately 28.5% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares; and (iii) approximately 5.4% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares and all Conversion Shares.

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The Issue Price

The Issue Price is the same as both of the CB Conversion Price and the CPS Conversion Price, and was determined on the same basis, being arm’s length negotiations between the Group and the Vendor with reference to the average closing prices of the Shares from 19 March 2015 (being the date of the First Announcement) to 22 May 2015 (being the Last Trading Day).

Analysis on historical Share price movement

Set out below is a chart showing the movement of the daily closing prices of the Shares as quoted on the Stock Exchange from 1 May 2014 up to and including the Last Trading Day (the “Review Period”):

HK$ Historical closing price of the Shares 1.4 1.2 1 0.8 0.6 0.4 0.2 0

l-2014 -2014 n-2014 u g-2014 v u J u ep-2014 Jan-2015 May-2014 J A S Oct-2014No Dec-2014 Feb-2015Mar-2015Apr-2015May-2015

Source: Website of the Stock Exchange

Note: Trading in the Shares was suspended (i) from 16 July 2014 to 22 July 2014, both days inclusive; and (ii) from 1:00 p.m. on 22 May 2015, being the Last Trading Day.

We noted that the daily closing prices of the Shares ranged from HK$0.65 per Share to HK$1.31 per Share during the Review Period. As at the Latest Practicable Date, the closing price of the Shares was HK$0.97 per Share.

Comparison with other transactions involving issue of consideration shares

To evaluate the fairness and reasonableness of the terms of the Consideration Shares, we have identified to the best of our knowledge and as far as we are aware of, from 1 March 2015 up to the Last Trading Day, being a period of approximately three months, 28 transactions by companies listed on the Stock Exchange which involved the issue of shares as consideration for acquisitions (the “Share Comparables”). Shareholders should note that the businesses, operations and prospects of the Company are not the same as the Share Comparables. However, for the purpose of providing Shareholders with a general reference for common recent market practice of companies listed on the Stock Exchange in transactions which involved the issue of shares as

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consideration for acquisitions, we consider the Share Comparables to be fair and representative. The table below summarises our relevant findings:

Premium/(Discount) of the issue price over/(to) the closing price per share on the last trading day on/prior to announcement/the date of the agreement in relation Date of to the respective announcement Company name Stock code issue of shares %

3 March 2015 China Household Holdings Limited 692 3.77

6 March 2015 Pegasus Entertainment Holdings Limited 1326 (3.80)

10 March 2015 Madex International (Holdings) Limited 231 (9.91)

12 March 2015 China Regenerative Medicine International 8158 (15.25) Limited

13 March 2015 Addchance Holdings Limited 3344 (3.10)

17 March 2015 Mega Medical Technology Ltd. (formerly 876 (13.04) known as Wing Tai Investment Holdings Limited)

25 March 2015 Highlight China IoT International Limited 1682 (30.17)

31 March 2015 Lerado Group (Holding) Company Limited 1225 (12.28)

1 April 2015 China Precious Metal Resources Holdings 1194 26.67 Co., Ltd.

8 April 2015 Creative Energy Solutions Holdings Limited 8109 1.30

10 April 2015 Hoifu Energy Group Limited 7 17.90

10 April 2015 Heritage International Holdings Limited 412 (46.00)

13 April 2015 Jiangnan Group Limited 1366 (12.77)

14 April 2015 Century Sage Scientific Holdings Limited 1450 (15.97)

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15 April 2015 Greater China Holdings Limited 431 (20.15)

15 April 2015 Alibaba Health Information Technology 241 (22.10) Limited

20 April 2015 China Smartpay Group Holdings Limited 8325 8.04

21 April 2015 Yuan Heng Gas Holdings Limited 332 0.00

24 April 2015 PetroAsian Energy Holdings Limited 850 29.60

26 April 2015 Guocang Group Limited 559 (10.11)

27 April 2015 China Mining Resources Group Limited 340 (50.70)

28 April 2015 Tongda Group Holdings Limited 698 (5.29)

30 April 2015 Chinese Food and Beverage Group Ltd. 8272 (43.14)

4 May 2015 Merry Garden Holdings Limited 1237 1.40

5 May 2015 China Technology Solar Power Holdings 8111 12.24 Limited

8 May 2015 HC International, Inc. 2280 (23.84)

15 May 2015 Eternity Investment Limited 764 (4.11)

15 May 2015 Sinoref Holdings Limited 1020 (31.91)

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Maximum 29.60

Minimum (50.70)

Average (9.74)

The Consideration (35.11) Shares (Note)

Source: Website of the Stock Exchange

Note: The discount of approximately 35.11% is calculated based on the closing price of the Shares on the Last Trading Day. Should the closing price of the Shares on the date of the First Announcement is used, the Issue Price represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement.

As presented by the above table, the issue prices of the Share Comparables ranged from a discount of approximately 50.70% to a premium of approximately 29.60% to/over the respective closing prices of their shares as at the last trading days on/prior to the release of the relevant announcements/the dates of agreements in relation to the issue of consideration shares for the respective acquisitions. The Issue Price, which represents a premium of approximately 3.66% over the closing price of the Shares on the date of the First Announcement and a discount of approximately 35.11% to the closing price of the Shares on the Last Trading Day, falls within the range of the Share Comparables.

Based on the above and having taken into consideration that the Issue Price represents a premium over the unaudited consolidated net assets attributable to equity holders of the Company per Share as at 30 September 2015, we consider that the Issue Price is fair and reasonable so far as the Independent Shareholders are concerned.

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3. Financial effects of the Acquisition

Upon Completion, the Target Group will become wholly owned subsidiaries of the Company and their results, assets and liabilities will be consolidated into the consolidated financial statements of the Company. The unaudited pro-forma financial information of the Enlarged Group (the “Pro-forma Information”) as a result of the completion of the Acquisition is included in Appendix V to the Circular.

3.1 Earnings

Based on the accountants’ report on the Target Group as set out in Appendix IIIA to the Circular, the Target Group generated profit attributable to owners of the Target Company of approximately RMB140.8 million for the year ended 31 December 2014. According to the Pro-forma Information, assuming the Acquisition had been completed on 1 April 2014, the Enlarged Group would have generated profit attributable to Shareholders of approximately RMB417.3 million for the year ended 31 March 2015 whereas the Group recorded loss of approximately HK$22.7 million (equivalent to approximately RMB18.9 million) for the year ended 31 March 2015.

3.2 Working capital

The Acquisition will be satisfied by the issuance of the Consideration Shares, the Convertible Bonds and the Convertible Preferenec Shares, and hence there will be no material negative impact on the cashflow of the Group in this regard. The Group had bank balances and cash of approximately HK$25.9 million (equivalent to approximately RMB21.6 million) as at 30 September 2015. From the Pro-forma Information, the bank balances and cash of the Enlarged Group would be approximately RMB298.2 million assuming Completion took place on 30 September 2015.

3.3 Net asset value

The unaudited consolidated net asset value attributable to the Shareholders was approximately HK$700.1 million (equivalent to approximately RMB583.4 million) as at 30 September 2015. According to the Pro-forma Information, the unaudited consolidated net asset value of the Enlarged Group attributable to the Shareholders would become approximately RMB1,354.7 million.

In view of the possible financial effects of the Acquisition to the Group as mentioned above, we are of the opinion that the Acquisition will be likely to improve the profitability as well as the net asset base of the Group and in the interests of the Company and the Shareholders as a whole.

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4. Possible dilution effect on the shareholding interests of the public Shareholders

The following table depicts, assuming there being no issue (other than the Consideration Shares and the Conversion Shares) or repurchase of Shares from the Latest Practicable Date up to Completion, the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) upon Completion but without taking into account the exercise of any Convertible Bonds and the Convertible Preference Shares; and (iii) upon Completion and having taken into account the exercise in full of conversion rights attaching to the Convertible Bonds at the CB Conversion Price and the exercise in full of the conversion rights attaching to the Convertible Preference Shares:

Immediately after allotment and issue of (i) the Consideration Shares; (ii) the CB Conversion Shares upon the exercise in full of the Immediately after conversion rights attaching allotment and issue of to the Convertible Bonds; Consideration Shares, but and (iii) the CPS before the exercise of the Conversion Shares upon conversion rights attaching the exercise in full of the to the Convertible Bonds conversion rights attaching As at the and the Convertible to the Convertible Shareholders Latest Practicable Date Preference Shares Preference Shares (Note 1) Approximate Approximate Approximate Shares % Shares % Shares %

Charm Success (Note 2) 558,020,694 65.0 558,020,694 46.5 558,020,694 8.8 The Vendor (Note 2) – – 343,000,000 28.5 5,470,588,235 86.4 Sub-total – – 901,020,694 75.0 6,028,608,929 95.2 Public: Public Shareholders 300,429,306 35.0 300,429,306 25.0 300,429,306 4.8

Total 858,450,000 100.0 1,201,450,000 100 6,329,038,235 100

Notes:

2. As at the Latest Practicable Date, Charm Success and the Vendor are ultimately beneficially wholly-owned by Ms. Cui, the daughter of Ms. Chai, who in turn is an executive Director and the chairperson of the Board.

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As demonstrated by the table above, the shareholding interests of the public Shareholders in the Company would be diluted by (i) approximately 10 percentage points as a result of the allotment and issue of the Consideration Shares but before the exercise of the conversion rights attaching to the Convertible Bonds and the Convertible Preference Shares; and (ii) approximately 30.2 percentage points as a result of the allotment and issue of (a) the Consideration Shares; (b) the CB Conversion Shares upon the exercise in full of the conversion rights attaching to the Convertible Bonds; and (c) the CPS Conversion Shares upon the exercise in full of the conversion rights attaching to the Convertible Preference Shares. Nevertheless, holder of Convertible Bonds and Convertible Preference Shares shall not be permitted to convert the Convertible Bonds or the Convertible Preference Shares (or part thereof) if upon such allotment and issue or conversion (as the case may be) would result in the public float of the Shares being less than 25% of the then issued share capital of the Company at the date of the relevant exercise, causing the public float of the Company being unable to meet the requirements under the Listing Rules.

Nevertheless, taking into account (i) the reasons for the Acquisition and the potential benefits of the Acquisition to the Group; (ii) the financial effects of the Acquisition on the Enlarged Group; and (iii) the terms of the Sale and Purchase Agreement, we are of the view that the level of dilution to the shareholding interests of the public Shareholders is acceptable.

5. Important risk factors of the Acquisition

Shareholders’ attention is also drawn to the section headed “Risk Factors” in the Circular for the risks relating to, among others, the Acquisition, the business of the Enlarged Group, property development in the PRC and conducting business in the PRC, including but not limited to:

(i) Upon Completion, property development in the PRC will become the principal business of the Enlarged Group and accordingly, the performance of the Enlarged Group will become more susceptible to the performance of the PRC property market. The PRC property market is affected by many factors, including changes in the PRC social, political, economic and legal environment and changes in the PRC government’s fiscal and monetary policies. There is no assurance that the demand for new properties in places where the Enlarged Group has or will have operations will continue to grow in the future or that there will not be a market downturn in the PRC property sector;

(ii) Due to various factors such as limited supply of suitable land for development in the PRC, capital requirements for land acquisition, increasing property development costs and time required for completing property projects, the Enlarged Group is expected to only be able to undertake a limited number of property developments at any one point in time. Therefore, the revenue and results of operations of the Enlarged Group may vary significantly from period to period depending on the number of properties delivered by it during a specific period; and

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(iii) In order to develop and complete a property development, the Enlarged Group is required to obtain various permits, licenses, certificates and other approvals. Each approval is contingent upon the satisfaction of various conditions, which are often subject to the discretion of relevant government authorities and subject to changes due to new laws, regulations and policies, especially those with respect to the real estate sector, promulgated from time to time. There is no assurance that the Enlarged Group would be able to obtain all necessary certificates and permits for its projects in a timely manner.

RECOMMENDATION

Having considered the principal factors and reasons described above, we are of the opinion that the terms of the Sale and Purchase Agreement are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and the Sale and Purchase Agreement and the transactions contemplated thereunder are in the interests of the Company and the Shareholders as a whole. Accordingly, we advise the Independent Shareholders, as well as the Independent Board Committee to recommend the Independent Shareholders, to vote in favour of the relevant resolutions to be proposed at the SGM to approve the Acquisition.

Yours faithfully, For and on behalf of Quam Capital Limited Gary Mui Deputy Chief Executive Officer Head of IPO and Capital Markets

Mr. Gary Mui is a licensed person registered with the SFC and a responsible officer of Quam Capital Limited to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has over 15 years of experience in the finance and investment banking industry.

* for identification purposes only

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This circular contains forward-looking statements that state the intentions, beliefs, expectations or predictions of the Group, the Target Group and the Enlarged Group for the future that are, by their nature, subject to significant risks and uncertainties, including the risk factors described in this circular. These forward-looking statements include all statements in this circular that are not historical facts, including, without limitation, statements relating to:

(a) the Enlarged Group’s operations, development plans and business prospects;

(b) the future developments, trends and conditions in the PRC property development sector;

(c) the Enlarged Group’s strategies, plans, objectives and goals and its ability to implement such strategies and achieve its plans, objectives and goals;

(d) the Enlarged Group’s future capital needs and capital expenditure plans;

(e) the amount and nature of, and potential for, future development of the Enlarged Group’s business;

(f) the regulatory environment relating to, and the general industry outlook for the PRC property development sector;

(g) prospective financial matters regarding the Enlarged Group’s business, results of operations and financial condition;

(h) the development costs in relation to the property projects of the Target Group;

(i) the Target Group’s continual review of its strategy regarding its real estate business in the PRC;

(j) the competitive market for property developers and the actions and developments of the Target Group’s competitors in the PRC; and

(k) the general political and economic environment in the PRC.

When used in this circular, the words “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “ought to”, “plan”, “project”, “seek”, “should”, “will”, “would” and similar expressions, as they relate to the Group, the Target Group and/or the Enlarged Group, are intended to identify forward-looking statements. However, all statements in this circular other than statements of historical facts are forward-looking statements. Such forward-looking statements reflect the views of the management of the Group, the Target Group and/or the Enlarged Group (as the case may be) as at the date of this circular with respect to future events and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this circular. Although the Directors believe that the expectations reflected in such

– 122 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FORWARD-LOOKING STATEMENTS forward-looking statements are reasonable, actual results and events may differ materially from information contained in the forward-looking statements as a result of a number of factors, including:

(a) the performance of the PRC property market;

(b) the Enlarged Group’s ability to successfully complete and realise benefits from its development projects;

(d) the Enlarged Group’s levels of indebtedness and interest payment obligations;

(e) the Enlarged Group’s ability to effectively manage its planned expansion;

(f) the performance of its independent contractors;

(g) the Enlarged Group’s ability to stay abreast of market trends;

(h) the Enlarged Group’s ability to continue to use certain properties in an undisrupted manner;

(i) changes in the fair value of the Enlarged Group’s investment properties;

(j) the Enlarged Group’s ability to effectively manage its operational and project development costs;

(k) the Enlarged Group’s ability to retain core team members and attract qualified and experienced personnel;

(l) the Enlarged Group’s ability to liquidate assets in response to changes in economic and financial conditions, as necessary;

(m) the Enlarged Group’s ability to maintain and renew the permits and licences it requires to undertake its business operations;

(n) prospective financial information of the Enlarged Group; and

(o) other factors beyond the Company’s control.

Should one or more of these risks or uncertainties materialise, or should the underlying assumptions prove to be incorrect, the results of operations and financial condition of the Group, the Target Group and/or the Enlarged Group may be adversely affected and may vary materially from those described herein as anticipated, believed or expected. Accordingly, such statements are not a guarantee of future performance and you should not place undue reliance on such forward looking statements. Moreover, the forward-looking statements should not be regarded as representations by the Company that its plans and objectives will be achieved or realised.

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The forward-looking statements in this circular reflect the views of the management of the Group, the Target Group and/or the Enlarged Group (as the case may be) as at the date of this circular and are subject to change in light of future developments. Subject to the requirements of the Listing Rules, the Company does not intend to update or otherwise revise the forward looking statements in this circular, whether as a result of new information, future events or otherwise.

– 124 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

You should carefully consider the following risk factors together with all other information contained in this circular in considering the Acquisition. If any of the possible events described below occurs, the business, financial condition, results of operations and prospects of the Enlarged Group could be materially and adversely affected. The risks and uncertainties described below may not be the only ones that are faced by the Enlarged Group. Additional risks and uncertainties that the Company is not aware of or that the Company currently believes are immaterial may also adversely affect the Enlarged Group’s business, financial condition, results of operations and prospects.

RISKS FACTORS RELATING TO THE ACQUISITION

Completion is subject to the fulfilment of conditions precedent and there is no assurance that they can be fulfilled and/or the Acquisition will be completed as scheduled and contemplated, or at all

A number of the conditions precedent to Completion as set out in the section headed “Letter from the Board – the Acquisition – the Sale and Purchase Agreement – Conditions precedent” in this circular involve the decisions of third parties, including approvals by the Independent Shareholders at the SGM and the approval of the new [REDACTED]by the Listing Committee of the Stock Exchange. As fulfilment of these conditions precedent are not within the control of the parties involved in the Acquisition, there is no assurance that they can be fulfilled and/or the Acquisition will be completed as scheduled and contemplated, or at all.

The shareholding percentages of the existing Shareholders, save and except those of the controlling Shareholders of the Company, will be diluted following the issue of the new Shares, and any value enhancement of the Shares as a result of the Acquisition may not offset such dilutive effect to these existing Shareholders

Pursuant to the Sale and Purchase Agreement, if the parties proceed to Completion, the Company will, as payment of the Consideration, issue 343,000,000 Consideration Shares and an aggregate of [REDACTED] Conversion Shares upon the exercise in full of the conversion rights attaching to the Convertible Bonds and the Convertible Preference Shares, each under the condition that such issue of [REDACTED] shall not result in the public float of the Company being less than 25% (or any given percentage as required by the Listing Rules). The total number of Consideration Shares and the Conversion Shares represent approximately [REDACTED] of the issued share capital of the Company as at the Latest Practicable Date and approximately [REDACTED] of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares and the Conversion Shares (assuming the conversion rights attaching to the Convertible Bonds and the Convertible Preference Shares are exercised in full). Please refer to the paragraph headed “Effect on the shareholding structure of the Company” in the section headed “Letter from the Board” in this circular for further details of the shareholding structure of the Company upon Completion.

As a result, the shareholding percentages of the existing Shareholders, save and except those of the controlling Shareholders of the Company, would be diluted when the Company issues the Consideration Shares and the Conversion Shares (as the case may be). Any value enhancement of the Shares as a result of the Acquisition may not offset such dilutive effect to these existing Shareholders nor necessarily be reflected in their market price.

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RISKS RELATING TO THE BUSINESS OF THE ENLARGED GROUP

The performance of the Enlarged Group will largely be dependent on the performance of the PRC property market, particularly in the cities where the Enlarged Group operates and intends to operate

Upon Completion, property development in the PRC will become the principal business of the Enlarged Group and, accordingly, the performance of the Enlarged Group will become more susceptible to the performance of the PRC property market. As at the Latest Practicable Date, the Enlarged Group had a total of six residential projects, one commercial property project and one tourism property project in Jilin Province of the PRC. Any adverse development in the demand for properties and any measures the PRC government may take to restrict the growth of the property market in China, particularly in the cities where the Enlarged Group has or planned to develop properties, may adversely affect the business, financial condition, results of operations and prospects of the Enlarged Group.

The PRC property market is affected by many factors, including changes in the PRC social, political, economic and legal environment and changes in the PRC government’s fiscal and monetary policies. With respect to the Enlarged Group, it is particularly susceptible to changes in economic conditions, the confidence of consumers and investors in the property market, as well as their spending patterns and preferences. The PRC property market has experienced fluctuations in recent years in response to PRC government policies and trends in the PRC and world economy. In particular, the PRC property market is affected by the recent slowdown in China’s economic growth. There are increasing concerns over the sustainability of the property market growth in China. Any global or PRC economic slowdown or financial turmoil in the future may adversely affect the business of the potential purchasers, investors and tenants of the properties developed and to be developed by the Enlarged Group, which may lead to a decrease in the general demand for the property projects of the Enlarged Group thus a decrease in their selling prices or rents. Therefore, any drop in consumer demand for the goods and services offered by such retail shops could reduce the rental income of the Enlarged Group therefrom.

There is no assurance that the demand for new properties in places where the Enlarged Group has or plans to have operations will continue to grow in the future or that there will not be a market downturn in the PRC property sector. Any adverse development and the ensuing decline in property sales and leasing activity or reduction in property prices and rates of rental in China may adversely affect the business, financial condition and results of operations of the Enlarged Group.

– 126 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

There is no assurance that the Enlarged Group will always be able to successfully identify and acquire suitable land for development at a competitive cost

The sustainability of the business of the Enlarged Group is expected to be dependent largely on the ability of the Enlarged Group to identify and acquire suitable land in the cities where the Enlarged Group operates, and intends to operate, in line with the business strategies of the Enlarged Group. To sustain the growth of the property development business of the Enlarged Group, the Enlarged Group will need to replenish its land reserves on a continual basis. In doing so, the Enlarged Group may incur significant costs in identifying, evaluating and acquiring suitable new land for development. The Directors believe that there is a limited supply of suitable land that satisfies the requirements of the Enlarged Group in the cities or regions in which the Enlarged Group operates and intends to operate. It is also expected that the Enlarged Group will face intense competition from other property developers for sites that the Enlarged Group may be interested in. The future growth prospects and results of operations of the Enlarged Group may, therefore, be adversely affected if the Enlarged Group fails to identify and acquire a sufficient amount of suitable new land for development at competitive cost levels.

The policies of the PRC government on land supply may also affect the costs of land acquisition of the Enlarged Group and thus hinder the expansion plan of the Enlarged Group in property development. The PRC government controls the land supply and regulates the ways in which property developers may obtain land for property development. Such measures, and any other similar measures in the future, may subject the Enlarged Group to intensive competition from other property developers as land at locations which the Directors of the Enlarged Group believe to be suitable are expected to be highly sought after among property developers in the PRC. Changes in government policies that reduce the land supply or limit the ability of the Enlarged Group to tender for land may materially and adversely affect the business and financial condition of the Enlarged Group. Likewise, as the cost for land acquisition may rise in the future, the gross profit margin of the Enlarged Group and the ability of the Enlarged Group to maintain its land reserves at a competitive cost may be materially and adversely affected.

The Target Group generated revenue principally from the sale of properties that depends on a number of factors including the schedule of its property development and the timing of property sales

During the Track Record Period, the Target Group generated its revenue principally from the sale of properties it developed. For the years ended 31 December 2012, 2013 and 2014 and for the eight months ended 31 August 2014 and 2015, the revenue of Ground Real Estate Group from sale of properties amounted to 99.2%, 98.3%, 98.6%, 98.7% and 96.6% of its total revenue, respectively. Upon Completion, the results of operations of the Enlarged Group may therefore fluctuate alongside the schedule of property development of the Enlarged Group and the schedule when the properties are offered to the market for sale.

Due to various factors, such as limited supply of suitable land for development in the PRC, capital requirements for land acquisition, increasing costs for property development and time required for completing property projects, the Enlarged Group is

– 127 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS expected to only be able to undertake a limited number of property developments at any point in time. As indicated immediately above, the schedule of delivery of properties varies and will vary according to the property development and construction schedule of the Enlarged Group and, therefore, the revenue and results of operations of the Enlarged Group may vary significantly from period to period, depending on the number of properties delivered by it during a specific period. In addition, the schedule of property development is subject to the overall business planning of the Enlarged Group from time to time. Hence, the quantity of properties delivered by the Enlarged Group must not be regarded as an indication of the actual demand for such properties in the market during any specific period.

In addition, the Enlarged Group may experience fluctuations in its operating results due to a number of factors, including fluctuations in costs and/or expenses, such as land grant premium, development costs and selling and marketing expenses and changes in market demand for the properties developed by the Enlarged Group. Accordingly, the historical results of operations and cash flow positions of the Target Group in the past must not be regarded as an indication to the Enlarged Group’s future results of operations and cash flow positions in the future nor should they be considered a meaningful measure of the financial performance of the Enlarged Group for any specific period of time. Furthermore, the property development projects of the Enlarged Group may be delayed or adversely affected by a combination of factors beyond its control, which may in turn adversely affect its results of operations and cash flow position.

The Enlarged Group may not be able to complete its property development projects or deliver its properties on time, on budget or at all

There are a number of factors that may have an adverse impact on the progress, budget and sales of the property development projects of the Enlarged Group at any point of time. These non-exhaustive factors include:

• changes in market conditions, economic downturns and decreases in business and consumer sentiment in general;

• delays in obtaining the necessary licenses, permits or approvals from government agencies or authorities;

• negligence or poor work quality of contractors;

• changes in government rules, regulations, planning and priorities and the related practices and policies, including the reclamation of land for urban development;

• relocation of existing residents and demolition of existing structures;

• increases in the prices of construction materials;

• shortages of materials, equipment, contractors and skilled labour;

• latent soil or subsurface conditions and latent environmental damage requiring remediation;

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• government-mandated changes in the Enlarged Group’s property development business;

• unforeseen engineering, design, environmental or geographic problems;

• labour disputes;

• construction accidents;

• the discovery of historically significant objects on or around project sites;

• the involvement of non-governmental organisations or other parties against a property development projects for environmental or other reasons;

• natural disasters or adverse weather conditions; and

• such other unforeseen problems or circumstances.

Accordingly, any delay in construction or any failure to complete the construction of a property project according to the planned specifications, schedule or budget resulting from the abovementioned factors may adversely affect the results of operations and financial position of the Enlarged Group and may also cause reputational damage to the Enlarged Group.

Under the typical sales contracts and lease agreements entered into by the Enlarged Group, the relevant project development subsidiary of the Enlarged Group makes certain undertakings in respect of the time when the subject property will be delivered. Under these sales contracts and lease agreements, the Enlarged Group is liable to remedies to the prospective purchasers and tenants. In addition, the Enlarged Group is also liable to similar damages under relevant PRC laws and regulations for remedies for breach of such an undertaking. If the Enlarged Group fails to complete and deliver the properties on time, the prospective purchasers and tenants may seek compensation for late delivery pursuant to either the relevant sales contracts or lease agreements or relevant PRC laws and regulations. In addition, significant time and resources might have been committed on relevant property project before reaching the conclusion that such property project could not be completed, which will result in the loss of all or part of the investment of the Enlarged Group in such property project. If the Enlarged Group is unable to complete its property projects as planned, its business, financial condition and results of operations will be materially and adversely affected.

Expansion into new geographical markets may impact the performance, profitability and results of operations of the Enlarged Group

Expansion into new geographical markets in the PRC, is an important business strategy of the Enlarged Group as it will help extend the footprint of the property development business of the Enlarged Group outside Jilin Province of the PRC. However, there is no assurance that these proposed property development projects will be

– 129 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS completed successfully. In addition, the Target Group, and thus the Enlarged Group, may not be able to identify suitable locations with sufficient growth potential to expand its market reach. In any new geographical market the Enlarged Group enters into or will enter into, it may face intense competition from other property developers with similar expansion plans. As the Enlarged Group may face challenges not previously encountered, it may fail to recognise or properly assess risks or take full advantages of opportunities.

Furthermore, the experience of the Target Group in property development in Jilin Province of the PRC may not be readily transferable to, and replicated in, other target new markets. Property development market in such new geographical markets may be substantially different from each other in terms of the level of local economic and industrial development, local governmental policies and support, the development phases of local businesses, market demand for our properties, types of properties to be developed and their development cycles. Therefore, the Enlarged Group may have limited ability to leverage its established brands and reputation in such target new markets. In addition, the administrative, regulatory and tax environments in such target new markets may be materially different from each other which may result in the Enlarged Group using additional expenses and resources or facing difficulties in complying with new procedures and adapting to new environments in the target new markets. The Enlarged Group may not have the same level of familiarity with local governments, business practices, regulations and customer preferences as compared to other property developers that have already gained experience in such target new markets and in such case, the Enlarged Group will be in a relatively disadvantageous position.

As the business of the Enlarged Group continues to expand, the Enlarged Group will have to continue to improve its managerial, development and operational expertise and allocation of resources. To effectively manage its expanded operations, the Enlarged Group will need to continue to recruit and train managerial, accounting, internal audit, engineering, technical, sales and other staff to satisfy its requirements for operations of the property development. In order to fund the property projects under development of the Enlarged Group and its future growth, the Enlarged Group needs to have sufficient internal capital sources or access to additional financing from external sources. Further, the Enlarged Group will be required to manage relationships with a greater number of customers, tenants, suppliers, construction contractors, service providers, financiers and other business partners. Accordingly, the Enlarged Group will need to further strengthen its internal control and compliance functions to ensure that it is able to comply with applicable legal and contractual obligations and to reduce its operational and compliance risks. There is no assurance that the Enlarged Group will not experience issues such as capital constraints, construction delays and operational difficulties in the new geographical markets. Also, the Enlarged Group may experience difficulties in expanding its existing business and operations and training an increasing number of personnel to manage and operate the expanded business.

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There is no assurance that the Enlarged Group will be able to attract and retain quality tenants for its investment properties

The Enlarged Group may not be able to attract and retain quality tenants for its investment property, Guangze International Shopping Centre. The investment property of the Enlarged Group competes from time to time for quality tenants against other property developers on various fronts, such as location, quality of properties, level and quality of maintenance, property management, rental rates, types of services provided and other lease terms. There is no assurance that the existing or prospective tenants will not opt for other properties. Any future increase in the supply of properties that compete with those held by the Enlarged Group would increase the competition for tenants, especially quality tenants and, as a result, the Enlarged Group may have to reduce rental rates or incur additional costs to retain existing tenants and attract new tenants. The Enlarged Group may also not be able to lease its investment properties to a desirable mix of tenants to achieve its business objectives or for rental rates that are consistent with its projections. If the Enlarged Group is not able to retain its existing tenants or attract new tenants to replace those that leave or lease the vacant properties, the occupancy rates of such leased properties may decline, which may adversely affect the competitiveness of such investment properties in the rental market. This in turn may have a material and adverse effect on the business, financial condition and results of operations of the Enlarged Group.

The fair value of the investment properties of the Enlarged Group is likely to fluctuate from time to time and may decrease significantly in the future, which may materially and adversely affect the profitability of the Enlarged Group

The Enlarged Group is required to reassess the fair value of its investment properties at the end of each reporting period. Under HKFRSs, gains or losses arising from changes in the fair value of the investment properties of the Target Group are included in its consolidated statements of profit or loss for the period in which they arise. The investment properties were revalued by Savills, an independent property valuer, as at 31 December 2012, 2013 and 2014 and 31 August 2015, on an open market and existing use basis, which reflected market conditions on the respective dates. Based on such valuation, the Target Group recognised the aggregate fair value of its investment properties and relevant deferred tax on its consolidated statements of financial position and change in fair value of investment properties and movements of the relevant deferred tax on its consolidated statements of profit or loss. For the years ended 31 December 2012, 2013 and 2014 and for the eight months ended 31 August 2014 and 2015, the increases in fair value of investment properties were RMB123.2 million, RMB56.7 million, RMB151.9 million, RMB118.2 million and RMB17.7 million, respectively.

Despite their impact on the reported profit, fair value gains or losses do not change the cash position of the Enlarged Group as long as the relevant investment properties are retained with the Enlarged Group. The amount of revaluation adjustments has been, and will continue to be, subject to market fluctuations. As a result, there is no assurance that the changes in the market conditions will continue to create fair value gains on such investment properties or that the fair value of the investment properties of the Enlarged Group will not decrease in the future. In addition, the fair value of the investment properties of the Enlarged Group may materially differ from the amounts that would be

– 131 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS received in actual sales of the investment properties. Any significant decreases in the fair value of the investment properties or any significant decreases in the amount to be received in actual sales of the investment properties of the Enlarged Group as compared with the recorded fair value of such properties would materially and adversely impact the results of operations of the Enlarged Group.

The Enlarged Group may not be able to pursue the intended use of civil defence properties if the same are used by the PRC government and may, as a result, suffer a loss of income

According to Law of the People’s Republic of China on National Defence《中華人民 ( 共和國國防法》), Civil Air Defence Law of the People’s Republic of China《中華人民共和國 ( 人民防空法》), Property Law of the People’s Republic of China《中華人民共和國物權法》 ( ), Measures of the Development and Utilization of Civil Air Defence Construction during Peacetime《人民防空工程平時開發利用管理辦法》 ( ), Several Opinions regarding Further Advancing the Development of Civil Air Defence by the State Council and the Central Military Commission《國務院、中央軍委關於進一步推進人民防空事業發展的若干意見》 ( ), the construction of new buildings in cities should contain certain basements that may be used for civil defence purposes in time of war. Under the Civil Air Defence Law of the PRC, while an investor in civil air defence properties can use and manage civil air defence properties and derive profit from civil air defence properties in times of peace, such use must not impair their functions as civil air defence properties. The design, construction and quality of the civil air defence properties must also conform to the protection and quality standards established by the PRC government.

As at 30 November 2015, a GFA of 28,154.91 sq.m. under the Target Group’s development would be designated as civil air defense areas, the design planning proposals of which have been approved by the civil air defence authorities of the PRC government. Subject to obtaining the permit for use of civil air defense areas in peace time (人防工程平時使用證) or the written confirmations from the competent authorities upon completion of construction, these civil air defense areas are intended to be used by the Enlarged Group primarily as car parking spaces in peace time.

If the civil air defence areas of the Enlarged Group are used by the PRC government in the event of war, the Enlarged Group may not be able to pursue the intended use and such areas will no longer be a source of income for the Enlarged Group. The occurrence of any of the above could materially and adversely affect the business, financial condition and results of operations of the Enlarged Group.

The Enlarged Group’s business and financial results could be materially and adversely affected by its indebtedness

As at the Latest Practicable Date, the Target Group maintained a certain level of indebtedness, of which a large proportion was secured by some of its properties. As at 31 December 2012, 2013 and 2014 and 31 August 2015, the Target Group’s total bank and other borrowings amounted to, RMB300 million, RMB612.4 million, RMB526.6 million and RMB782.4 million, respectively. In addition, the Target Group’s total bank and other borrowings of RMB1,086.9 million as at 31 October 2015 (being the latest practicable date

– 132 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS for the purpose of determining indebtedness) were due within a period not exceeding one year. Please refer to the paragraph headed “Statement of Indebtedness” in the section headed “Financial Information of the Group” in this circular for further details of the Enlarged Group’s indebtedness position as at 31 October 2015.

The property development business is capital intensive, and typically requires substantial capital contribution for land acquisitions and property developments. The Target Group had capital commitments in an amount of RMB1,023.5 million, RMB951.9 million, RMB942.5 million and RMB971.2 million, respectively, as at 31 December 2012, 2013 and 2014 and 31 August 2015. Please refer to the paragraph headed “Commitments” in the section headed “Financial Information of the Target Group” in this circular for further details of the Target Group’s capital commitment and cash flow positions.

The Enlarged Group’s ability to repay the principal and interest on its borrowings and to service its capital commitments and current and non-current liabilities depends substantially on the cash flow and results of operations of its operating subsidiaries, which depend in part upon the social, political, economic, legal and other risks described herein, most of which are beyond its control. There is no assurance that the Enlarged Group will be able to achieve or maintain a net cash inflow from its operating activities in a sufficient amount or at all in the future. Any decline or under-performance of the Enlarged Group’s pre-sale, sale or leasing activities and any other matter adversely impacting the net cash inflow of the Enlarged Group could significantly affect its cash flow position. The Enlarged Group may have difficulty in securing additional financing, and its working capital for the purpose of its business operations and expansions may be insufficient. There can be no assurance that the Enlarged Group will always be able to raise the necessary funding to finance its current liabilities and capital commitments.

Certain restrictive covenants and risks normally associated with debt financing may limit or otherwise materially and adversely affect our business, financial condition and results of operations

The Enlarged Group is subject to certain restrictive covenants in its loan and financing agreements with certain banks. Some of its loan agreements, for example, obligate some of the Enlarged Group’s subsidiaries to maintain certain financial ratios. In addition, certain loan agreements contain covenants pursuant to which the Enlarged Group or its relevant operating subsidiaries may not enter into mergers or joint ventures, carry out any reorganisations, decrease its or their respective registered capital, transfer material assets, liquidate or change its shareholding without the relevant lenders’ prior written consent or unless it fully settles the outstanding amounts under the relevant loan agreements. Furthermore, as long as such loans are outstanding, some of the Enlarged Group’s relevant operating subsidiaries may not be able to provide guarantees to any third parties in the case where such loans will constitute assets increasing the suitability thereof. There is no assurance that the Enlarged Group will be able to abide by all of the restrictive covenants of any of its loan agreements in the future or obtain lenders’ consents or waivers in a timely manner or at all. The restrictive convenants may limit or otherwise have a material adverse effect on its business, financial condition and results of operations.

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If the Enlarged Group is unable to comply with the restrictive covenants of its current or future debt obligations and any other agreements, there could be a default under the terms of these agreements, in which event, the holders of the debt could accelerate repayment of the debt and declare all outstanding amounts due and payable or terminate the agreements, as the case may be. If any of these events occur, there is no assurance that the Enlarged Group’s assets and cash flow would be sufficient to repay in full all of its indebtedness which has become due and payable, or that it would be able to find alternative financing. Even if the Enlarged Group could obtain alternative financing, there is no assurance that it would be on terms favorable or acceptable to it.

Third party contractors may not always meet quality standards or provide services in a timely manner which may adversely impact on the development progress, sales and leasing of the Enlarged Group

The Target Group generally engages external architectural and design firms, construction contractors and suppliers to provide it with design and interior decoration, construction and related services, which the Target Group monitors through the project management, cost and contract department carried out by each project company.

There is no assurance that the services rendered or materials supplied by any of these external contractors and suppliers will always be satisfactory or meet the quality requirements of the Enlarged Group. In the event that the performance of the external contractors and suppliers falls short of the required standard, or the external contractors encounter financial, operational or managerial difficulties or disputes, the construction progress, sales, leasing or operation of the Enlarged Group’s property developments may be disrupted or delayed. The Enlarged Group may incur additional costs in respect of remedial action, such as the replacement of such contractors or suppliers, as well as potential damage to reputation and additional financial losses as a result of delay in completion. Any of the above factors could have a material adverse effect on the business, financial condition and results of operations of the Enlarged Group.

Increases in construction and development costs may have an adverse impact on the Enlarged Group’s results of operations

The Enlarged Group’s ability to derive profits from its property projects depends on how well it can control relevant construction and development costs. Construction costs in the PRC are generally increasing as contractors face rising materials and labour costs. To ensure that it obtains the best price from its contractors, the Target Group typically holds competitive tenders for its projects. However, the Target Group does not always award contracts to the contractor with the lowest tender price as there are a number of other factors which must be taken into account, including the contractor’s relevant skills and expertise, as well as the design and deadline demands of the relevant project.

There is no assurance that the Enlarged Group would be able to get the best prices from its contractors. Further, there is no assurance that the actual construction costs incurred for a project will not exceed the initial estimation of the Enlarged Group. If the costs of labour or construction materials increase significantly, and the Enlarged Group cannot offset such increase by reducing other costs or is unable to pass on such increase to the buyers or tenants of its properties, the Enlarged Group’s business, results of operations and financial position may be materially and adversely affected.

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The Enlarged Group’s business may be materially and adversely affected if it fails to obtain, or if there is any material delay in obtaining, relevant PRC governmental approvals for its property development projects

In order to develop and complete a property development, the Enlarged Group is required to obtain various permits, licenses, certificates and other approvals including, but not limited to, state-owned land use rights certificates, construction land planning permits, construction work planning permits, construction work commencement permits, pre-sale permits/sale permits for commodity properties and certificates or filings of completion and acceptance from relevant administrative authorities at various stages of project development. Each approval is contingent upon the satisfaction of various conditions, which are often subject to the discretion of relevant government authorities and subject to changes due to new laws, regulations and policies, especially those with respect to the real estate sector, promulgated from time to time.

During the Track Record Period, there were incidents where the Target Group occupied a parcel of land on which the construction and pre-sales of property were commenced before obtaining the relevant land use rights certificates and approvals. Please refer to the paragraph headed “Legal Proceedings and Compliance – Compliance” in the section headed “Business of the target Group” in this circular for details.

As at the Latest Practicable Date, the Target Group had been ordered by the relevant government authority to pay penalties of RMB12,554 and RMB58,000 for illegal occupation of land and unauthorised pre-sales respectively. Further, the Target Group has terminated the provisional pre-sales agreement with the customers and refunded the deposits received. As at the Latest Practicable Date, the Target Group received written confirmations from the competent authority that no further penalty will be imposed on such non-compliance incidents. However, if the Enlarged Group is required to pay additional penalty to the relevant government authorities or further compensation to those affected customers, the Enlarged Group’s business, results of operations and financial position may be materailly and adversely affected.

In addition, there is no assurance that the Enlarged Group would be able to obtain all necessary certificates and permits for its projects in a timely manner, or at all. Further there is no assurance that the Enlarged Group would not encounter problems fulfilling all or any of the conditions imposed for the grant of the necessary certificates or permits, or that the Enlarged Group would be able to adapt to new laws, regulations or policies that may come into effect from time to time with respect to the granting of such items. If the Enlarged Group fails to obtain, or is considered by relevant governmental authorities to have failed to obtain, or experience significant delays in obtaining, the requisite governmental permits, licenses, certificates and other approvals, the Enlarged Group is exposed to penalties as well as disruption or delays in its property development schedules, which in turn could materially and adversely affect its business, financial condition and results of operations.

– 135 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

The PRC government may impose a penalty on the Enlarged Group or cancel the land use rights for any project that is under development or held for future development which is not developed in compliance with the terms of the land use rights grant contract and/or applicable PRC laws

Under PRC laws and regulations, if a property developer fails to develop land according to the terms of the land use rights grant contract (including those relating to the payment of fees, designated use of land, amount of GFA developed, time for commencement and completion or suspension of the development and amount of capital invested), the relevant government authorities may issue a warning to or impose a penalty on the developer, or cancel the relevant land use rights.

Depending on the nature and extent of the non-compliance with the land use rights grant contract or the applicable PRC laws, the PRC government may impose various sanctions on the Enlarged Group, including imposing fines on relevant entities, cancelling the grant of the land use right, ordering a demolition of the relevant building, ordering that the proceeds or profits arising from the relevant properties be forfeited and ordering that compensation be paid to those individual property owners who suffered loss due to the revocation of the certificate of approval and/or business licence of the relevant entities.

In addition to the above sanctions and adverse consequences, there is no assurance that any cancellation of land use rights, demolition of buildings or imposition of penalties will not arise in the future. If the land use right of any property project of the Enlarged Group is forfeited by the PRC government, the Enlarged Group will not be able to continue the development on the affected land and recover the land, development and other costs incurred up to the date of such forfeiture or continue the operation on the affected land which in turn may lead to breach of contracts entered with customers. Any requirement for the Enlarged Group to pay penalties or revocation of the certificate of approval or business licence of any of the members of the Enlarged Group may adversely affect its business, results of operations or financial condition.

The total GFA of some of the Enlarged Group’s property developments may exceed the original permitted GFA and the excess GFA is subject to governmental approval and will require the Enlarged Group to pay additional land grant premium

The permitted total GFA for a particular development is set out in various governmental documents issued at various project development stages. In many cases, the underlying land grant contract will specify the permitted total GFA. Total GFA is also set out in the relevant urban planning approvals and various construction permits. If the constructed total GFA exceeds the permitted total, or if the completed development contains built-up areas that the authorities believe do not conform to the approved plans as set out in the relevant construction work planning permit, the Enlarged Group may not be able to obtain the acceptance and compliance form of construction completion (竣工驗收備案表) for its development and, as a consequence, the Enlarged Group would not be able to deliver individual units to purchasers or recognise the related pre-sale proceeds as revenue. Moreover, excess GFA requires additional governmental approval and the payment of additional land grant premium. If issues related to excess GFA cause delays in

– 136 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS the delivery of the Enlarged Group’s products, the Enlarged Group may also be liable to purchasers and tenants under its sales and purchase agreements and tenancy agreements, respectively. There is no assurance that constructed total GFA for each of the Enlarged Group’s existing projects under development or any future property developments will not exceed the permitted total GFA or that the authorities will determine that all built-up areas conform to the plans approved as set out in the construction permit. Further, there is no assurance that the Enlarged Group would have sufficient funding to pay any required additional land grant premium or to take any remedial action that may be required in a timely manner, or at all. Any of these factors may materially and adversely affect the Enlarged Group’s business, financial condition, results of operations and reputation.

The Enlarged Group is dependent on the sale of properties, which in turn depends on a number of factors including the Enlarged Group’s schedule of property development and the timing of property sales, which may impact on revenue recognition and cash flow and cause the results of operations of the Enlarged Group to fluctuate

A significant portion of the Target Group’s revenue has been derived from the sale of properties. Accordingly, results of the Enlarged Group’s operations may fluctuate due to factors such as the Enlarged Group’s schedule of property development and timing of property sales.

The Enlarged Group will generally recognise revenue from the sale of a property upon the completion of property construction and delivery of the property to the purchaser, at which point the significant risks and rewards of ownership are transferred to the buyer. Due to capital requirements for land acquisition and construction, limited land supply and the time required for completing a project, the Enlarged Group can undertake only a limited number of property development projects at a time. In addition, since the timing of delivery of the properties varies according to construction timetables, the revenue and results of operations of the Enlarged Group may vary significantly from period to period depending on the number of properties delivered during a specific period. As a result, the period-to-period comparisons of the Enlarged Group’s results of operations and cash flow positions may not be indicative of the Enlarged Group’s future results of operations and may not be as meaningful measures of the financial performance of a specific period as they would be for a company with a greater proportion of steady recurring revenues.

Furthermore, the Enlarged Group’s property development may be delayed or adversely affected by a combination of factors, including adverse weather conditions, delays in obtaining requisite permits and approvals from relevant government authorities, as well as other factors beyond the control of the Enlarged Group, which may in turn adversely affect the revenue recognition and consequently the cash flow and results of operations of the Enlarged Group.

The Enlarged Group may be liable to its customers for damages if the Enlarged Group does not deliver individual building ownership certificates in a timely manner

Property developers in the PRC are typically required to deliver to purchasers the relevant individual building ownership certificates within a time frame set out in the relevant property sale and purchase agreement or, for pre-sale of commodity properties

– 137 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS only, within certain days after delivery of the property. Property developers, including the Enlarged Group, generally elect to specify the deadline for the delivery in the property sale and purchase agreements to allow sufficient time for the application and approval processes. Under current regulations, the Enlarged Group is required to submit the documents required for registration, including land use rights documents and planning and construction permits, to the local bureau of housing administration after receipt of the completion and acceptance certificate for the relevant properties and to apply for the initial general property ownership certificate in respect of these properties. The Enlarged Group is then required to submit within regulated periods after delivery of the properties, the relevant property sale and purchase agreements, identification documents of the purchasers, proof of payment of deed tax, together with the general property ownership certificates, for the relevant local authority’s review and the issuance of the individual building ownership certificates in respect of the properties purchased by the respective purchasers. Delays by various administrative authorities in reviewing the application and granting approval, as well as other factors, may affect timely delivery of the general and individual building ownership certificates. Should a late delivery of any individual building ownership certificate be due to delays that are deemed to be caused by the Enlarged Group, the purchaser would be able to terminate the property sale and purchase agreement, reclaim the payment and claim damages, any of which could materially and adversely affect the Enlarged Group’s business, financial condition and results of operations. There is no assurance that the Enlarged Group would not incur material liabilities to purchasers in the future for the late delivery of individual building ownership certificates due to its fault or for any reason beyond its control.

The appraised value of the properties in the valuation report may be different from the actual realisable value and is subject to change

The valuations of the Enlarged Group’s properties contained in the valuation reports set out in Appendix VIA, Appendix VIB and Appendix VIC to this circular are prepared based on various valuation methodologies, bases and assumptions with reference to different property categorisations, natures, types, usages and development status. Please refer to the paragraphs headed “Property Categorization and Valuation Methodology” in each of the section headed “Property Valuation of the Group” set out in Appendix VIA to this circular, the section headed “Property Valuation of the Target Group” set out in Appendix VIB to this circular and the section headed “Property Valuation of Wan Sheng” set out in Appendix VIC to this circular for further details of the valuation methodologies adopted by the independent property valuers.

Furthermore, the valuations of the Enlarged Group’s properties are based upon certain assumptions which, by their nature, are subjective and uncertain, and may not be realised. Unless otherwise stated in this circular, such assumptions include:

• transferable land use rights in respect of the properties for respective specific terms at nominal land use fees have been granted, and land grant premium payables in respect of the relevant properties have been paid;

• the exclusion of an estimated price inflated or deflated by special terms or circumstances, such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by any party associated with the sale or any other element of special value;

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• no allowance being made for any charges, mortgages or amounts owing on the properties;

• the properties can be sold in the prevailing market without the effect of any deferred term contract, leaseback, joint venture or other similar arrangement which may serve to affect the values of the properties;

• all necessary consents, approvals and licences from relevant government authorities have been or will be granted without onerous conditions or delay;

• the Enlarged Group has an enforceable title to each of the properties and has free and uninterrupted rights to use, occupy or assign the properties for the whole of the respective unexpired land use terms as granted;

• the properties are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values; and

• the properties will be completed or developed as currently planned.

Further, unforeseen changes to property development projects as well as nationwide and local economic conditions may affect the value of the Enlarged Group’s properties. In particular, the fair value of these properties could remain stable or decrease in the event that the market for comparable properties experiences a downturn in the PRC, for example, as a result of the adoption and application of PRC government policies aimed at “cooling-off” the PRC property market or as a result of any global market fluctuations or economic downturn, or otherwise.

These valuations are not predictions of the actual value of the properties of the Target Group, as the case may be, and may deviate from values that could be realised in a public market transaction as at the date of valuation. Therefore, the appraised value of the properties may be different from their actual realisable value or a forecast of their realisable value.

The Enlarged Group will be partly dependent on rental income from its investment property portfolio in the future and any decline in rental rates and the value of its investment properties may adversely affect the Enlarged Group’s results of operations, financial conditions and prospects

A portion of the Enlarged Group’s property portfolio comprises investment properties for leasing and the Enlarged Group partly relies on rental income from these investment properties for operational expenses and property development. This renders the Enlarged Group highly sensitive to property market downturns, natural disasters and other unfavourable events or conditions in the PRC, especially in the retail sector. The Enlarged Group’s revenue derived from leasing of its completed investment properties and the value of its property investments may be adversely affected by a number of factors, including changes in tenants’ demands and preferences, the average market rents in the respective cities, the sales revenue of the tenants, the locations of its investment

– 139 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS properties and its ability to collect rents on time. The Enlarged Group will also have to incur costs in relation to maintenance, repair and reletting, which may fluctuate substantially, in order to maintain the attractiveness of the properties held for investment.

There is no assurance that the Enlarged Group’s existing and planned investment properties will continue to generate rental income at historical rates, or continue to be successful in the future. If the market rents in Jilin Province of the PRC decline as a result of changes in investor sentiment, government policies, population levels or any other cause, rental rates and the value of the Enlarged Group’s investment properties may be materially and adversely affected. If there is any downturn in the retail, financial or other industries in which the Enlarged Group’s existing or potential tenants are engaged, or deterioration in general commercial and economic conditions in the abovementioned cities and regions, demand for the Enlarged Group’s properties may be materially and adversely affected. If the Enlarged Group’s property leasing business is unable to generate adequate returns, its business, financial condition, results of operations and prospects may be adversely affected.

If the risk management and internal control policies and procedures of the Target Group fail to be implemented effectively, its business and prospects may be materially and adversely affected

The Target Group has recently enhanced its risk management and internal control policies and systems as part of a continuous effort to improve its risk management capabilities and enhance its internal controls. Please refer to the paragraphs headed “Risk Management” and “Legal Proceedings and Compliance” in the section headed “Business of the Target Group” for more details. However, there is no assurance that the risk management and internal control policies and procedures of the Target Group will adequately control or protect it against all risks. Some of these risks are unforeseeable or unidentifiable and may be more severe than what the Target Group may anticipate.

The Target Group’s risk management capabilities and ability to effectively monitor legal compliance and other risks are restricted by the information, tools, models and technologies available to it. In addition, given the limited history of some aspects of its risk management and internal control policies and procedures, the Target Group will require additional time to implement these policies and procedures in order to fully assess their impact and evaluate its compliance with them. Moreover, the Target Group’s employees will require time to adjust to these policies and procedures, and there is no assurance that its employees will be able to consistently comply with or accurately apply them.

If the Target Group’s risk management and internal control policies, procedures and systems fail to be implemented effectively, or if the intended results of such policies, procedures and systems are not achieved in a timely manner (including its ability to maintain an effective internal control system), the business, financial condition, results of operations and reputation of the Target Group, and thus the Enlarged Group may be materially and adversely affected.

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The Enlarged Group may be exposed to certain risks that are not covered by its insurance and any resultant loss may affect the Enlarged Group’s operations, financial condition and prospects

The Enlarged Group will maintain insurance policies where practicable covering both its assets and employees in line with general practice in the real estate industry, with policy specifications and insured limits which it believes are reasonable. However, in certain cases, it may be difficult to obtain adequate insurance coverage at all or at commercially acceptable rates. Certain types of losses, such as those resulting from wars, earthquakes or other acts of God, are generally not insured as a matter of industry practice. Please refer to the paragraph headed “Insurance” in the section headed “Business of the Target Group” in this circular for further information.

There is no assurance that adequate insurance coverage against risks of the Enlarged Group’s projects and income-generating properties will be available in the future on commercially reasonable terms or at commercially competitive rates. Should an uninsured loss or a loss in excess of insured limits occur, or should the Enlarged Group’s insurers fail to fulfill their obligations in relation to the sum insured, the Enlarged Group could suffer loss, including loss of rent or future revenue, and/or may be required to pay compensation to third parties. The Enlarged Group may also be liable for any debt or other financial obligation related to the relevant property or to third parties. Any such loss could adversely affect the Enlarged Group’s business, financial condition, results of operations and prospects.

The success of the Enlarged Group depends on the continued services of its senior management team and other qualified employees

The continued success and growth of the Enlarged Group depends on its ability to identify, hire, train and retain suitably skilled and qualified employees, including management personnel, with relevant professional skills. The services of its Directors particularly Ms. Chai Xiu, Mr. Wang Guanghui and Mr. Huang Bingxing, and members of senior management are essential to its success and future growth. The loss of a significant number of its Directors and senior management could have a material adverse effect on its business if it is unable to find suitable replacements in a timely manner. The Enlarged Group may not be able to successfully attract, assimilate or retain all of the personnel it needs. The Enlarged Group may also need to offer superior compensation and other benefits to attract and retain key personnel and, therefore, there is no assurance that the Enlarged Group will have the resources to fully achieve its staffing needs. Due to the intense competition for management and other personnel in the PRC property sector, any failure to recruit and retain the necessary management personnel and other qualified employees could have a material adverse impact on its business and prospects.

The Enlarged Group may be involved in legal and other proceedings arising out of its operations from time to time and may face significant liabilities as a result

The Enlarged Group may be involved in disputes with various parties involved in the development and sale of its properties, including contractors, suppliers, construction workers, purchasers and project development partners. The Enlarged Group may also be

– 141 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS involved in disputes with various parties relating to its property leasing and management business and hotel business. Please refer to the paragraph headed “Legal Proceedings and Compliance” in the section headed “Business of the Target Group” in this circular for details. These disputes may lead to various forms of protests against it or legal or other proceedings and may result in substantial costs, damages to its brand and reputation and a diversion of resources and management’s attention. In addition, the Enlarged Group may have disagreements with regulatory bodies in the course of its operations which may subject it to administrative proceedings and unfavorable decrees that result in pecuniary liabilities, cause delays to its property developments or otherwise disrupt its business operations. There is no assurance that the Enlarged Group will not be involved in any major disputes or legal or other proceedings in the future. Further, the Enlarged Group endeavors to structure its business in a tax efficient manner. If any of its arrangements is successfully challenged by relevant tax authorities, the Enlarged Group may incur additional tax liabilities that could adversely affect its results of operations or financial condition. In addition, from time to time, the officers and management of the Enlarged Group may be parties to litigation or other legal proceedings. Even though the Enlarged Group may not be directly involved in such proceedings, such proceedings may affect its reputation and, consequently, adversely impact its business.

Adverse media reports about the Enlarged Group or its projects, whether substantiated or not, may cause harm to its reputation and adversely affect its business operations

The development of, and future trends in, the PRC property industry, including business strategies of major property developers, have been the focus of numerous media reports. As a leading property developer in China, information about the Enlarged Group or its projects appears frequently in various media outlets. Some of these media reports contain inaccurate information about the Enlarged Group and its projects. There can be no assurance that there will not be false, inaccurate or adverse media reports about the Enlarged Group or its projects in the future. In particular, the Enlarged Group may be required to respond or take defensive and remedial actions with regard to such inaccurate or adverse media reports, which may adversely divert its resources and its management’s attention and adversely affect its business operations. There can be no assurance as to the appropriateness, accuracy, completeness or reliability of any media reports regarding the Enlarged Group.

The Enlarged Group’s future dividend payments will be proposed by the Board

The amount of any dividends that the Enlarged Group may declare and pay in the future will be proposed by the Board and subject to the Shareholder meeting’s approval and will be based on its distributable profit and take into consideration its earnings, cash flow, financial condition, the availability of dividends from its subsidiaries, business planning, return to its Shareholders, capital requirements, finance costs, the external financing environment and any other factors that the Directors may deem relevant. The payment of dividends may also be limited by legal restrictions and by financing agreements that the Enlarged Group may enter into from time to time. The Enlarged Group cannot guarantee when, if and in what form dividends will be declared or distributed in the future. The amounts of distributions that any company within the Enlarged Group declared and made in the past are not indicative of the dividends that the Enlarged Group may pay in the future.

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The Enlarged Group may be subject to additional payments of statutory employee benefits

According to PRC labour laws and regulations, the Enlarged Group is required to pay various statutory employee benefits, including pensions, housing fund, medical insurance, work-related injury insurance, unemployment insurance and childbearing insurance for all employees to designated government agencies based on the contribution ratio pre-set by the local labour authorities. During the Track Record Period, certain PRC subsidiaries of the Target Group failed to make adequate social security insurance, medical insurance and housing provident fund for its employees. Please refer to the paragraph headed “Legal Proceedings and Compliance – Compliance” in the section headed “Business of the Target Group” in this circular for details.

As advised by the PRC Legal Advisers to the Company according to the Social Insurance Law of the People’s Republic of China《中華人民共和國社會保險法》 ( ), the Target Group may be ordered to pay all the outstanding social insurance contributions for the relevant employees, a daily default fine of 0.05% and a fine equivalent to one to three times of the outstanding amount if such payment is not made within the prescribed time limit prescribed by the relevant social insurance contribution collection institution. Further according to the Administrative Regulations on the Housing Provident Fund (《住房公積金管理條例》), failure in registering and opening accounts for employees’ housing provident fund contributions may give rise to maximum fine of RMB50,000. The housing provident fund management centre shall order the company that is overdue in the payment and deposit of, or underpays the housing provident fund to make the payment and deposit within a prescribed time limit, failing which the housing provident fund management centre may ask the court to take enforcement measures against such company to collect the outstanding housing provident fund.

As at the Latest Practicable Date, the Target Group has not been subject to any order or penalty and no action has been taken by the governmental authorities in relation to social security insurance, housing provident fund. The Target Group has also received written confirmations from the competent authorities that its relevant subsidiaries have paid all the outstanding contributions and no further penalty will be imposed on such non-compliance incidents. However, if the Enlarged Group is required to make additional payments of statutory employee benefits, its operating expenses will increase and consequently its results of operations and financial condition may be materially and adversely affected.

RISKS RELATING TO PROPERTY DEVELOPMENT IN THE PRC

Business of the Enlarged Group is subject to extensive government regulations, and the PRC government may introduce further measures to curtail growth in the property sector

The business of the Enlarged Group is subject to extensive government regulation. As with other PRC property developers, the Company must comply with various PRC laws and regulations, including the policies and procedures established by local authorities designed to implement such laws and regulations. The PRC government exerts considerable direct and indirect influence on the development of the PRC property sector

– 143 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS by imposing industry policies and other economic measures, such as control over the supply of land for property development and control of foreign exchange, property financing, taxation and foreign investment. Specifically, the PRC government may restrict or reduce the land available for property development, place additional limitations on the ability of commercial banks to make loans to property developers and property purchasers, raise benchmark interest rates for commercial banks, impose additional taxes and levies on property sales and restrict foreign investment in the PRC property sector. Such property industry policies may materially and adversely affect the operations and/or future business development of the Company. There can be no assurance that the PRC government will not adopt additional and more stringent industry policies, regulations and measures in the future. If the Company fails to adapt its operations to such new policies, regulations and measures that may come into effect from time to time, or if such policy changes negatively impact the Enlarged Group’s business or cause it to incur additional costs, its business, financial condition, results of operations and prospects may be materially and adversely affected.

Investments in the PRC property sector have increased significantly in the past decade. In response to concerns over the rapid increase in property investments and property prices, from 2004 to the first half of 2008, the PRC government introduced various policies and measures to curtail property development. In the second half of 2008 and in 2009, in order to combat the impact of the global economic slowdown, the PRC government adopted measures to encourage consumption in the property market and to support real estate development. However, since December 2009, the PRC government has adjusted some of its policies in order to enhance regulation in the property market, restrain property purchases for investment or speculative purposes and keep property prices from rising too quickly in certain cities, including:

• abolishing certain preferential treatment relating to business taxes payable upon transfers of residential properties by property owners and imposing more stringent requirements on the payment of land grant premium by property developers;

• requiring higher minimum down payments, granting the right to commercial banks to stop lending to speculative developers;

• imposing property purchase restrictions on non-local residents, decreasing the maximum loan to value ratio of mortgage loans offered to borrowers, and increasing mortgage interest rates and construction loan interest rates;

• increasing the minimum down payment to at least 60% of the total purchase price for second-house purchases with a minimum lending interest rate of at least 110% of the benchmark rate, restricting purchasers in certain targeted cities from acquiring second (or further) residential properties and restricting non-residents in certain targeted cities that cannot provide any proof of local tax or social security payments for more than a specified time period from purchasing any residential properties, launching new property tax schemes in certain cities on a trial basis and levying business taxes on the full amount of the transfer price if an individual owner transfers a residential property within five years of the date of making the purchase as defined in the relevant regulations.

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These and other future measures may limit the Company’s access to capital, reduce market demand for its products and increase its finance costs. The Company cannot assure you that the PRC government will not adopt more stringent policies, regulations and measures in the future. If the Company fails to adapt its operations to new policies, regulations and measures that may come into effect from time to time with respect to the real property industry, or such policy changes negatively, the business, financial condition, results of operations and prospects of the Enlarged Group may be materially and adversely affected.

The Enlarged Group may not be able to continue its property development business and property management business if it fails to obtain, renew or maintain qualification certificates

In the PRC, property developers must obtain a qualification certificate in order to carry out property development. According to the Provisions on Administration of Qualifications of Real Estate Developers《房地產開發企業資質管理規定》 ( ), newly established property developers must first apply for a provisional qualification certificate which is valid for one year and can be renewed for a maximum of two additional years. A property developer is required to obtain a formal qualification certificate with an approved class before its provisional qualification certificate expires. These certificates are subject to renewal on an annual basis. Government regulations require developers to fulfill all statutory requirements before obtaining or renewing their qualification certificates. Each of the property project companies in the PRC is responsible for the annual submission of its renewal application and can only engage in property development within its qualification certificate class. If any of the project companies is unable to meet the relevant qualification requirements, it will generally be given a grace period to rectify any noncompliance and may be subject to a penalty of between RMB50,000 and RMB100,000. Failure to rectify the non-compliance within the grace period could result in the revocation of the qualification certificate and the business licence of the relevant project company.

In addition, before commencing their business operations, entities engaged in the provision of property services are required to obtain qualification certificates in accordance with the Property Management Regulations《物業管理條例》 ( ). A fine ranging from RMB50,000 to RMB200,000 may be imposed on any property service company which fails to obtain or renew a qualification certificate, and any profit generated may be disgorged. In addition, any property owners suffering any loss as a result of such breach are entitled to claim against the relevant property service company for compensation. If any of the project companies or property management companies of the Target Group fails to renew its relevant qualification certificates, the business, prospects, results of operations and financial condition of the Enlarged Group may be materially and adversely affected.

The property industry in China is still at a relatively early stage of development with a significant degree of uncertainty

Private ownership of property in China is still at a relatively early stage of development. Numerous factors may affect the development of the market and,

– 145 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS accordingly, it is very difficult to predict when and how much demand will develop. The limited availability of accurate financial and market information and the general low level of transparency in China’s property industry contribute to overall market uncertainty. Investors may be discouraged from acquiring new properties due to the lack of a liquid secondary market for commercial and residential properties. In addition, the limited amounts and types of mortgage financing available to purchasers, together with the lack of long-term security of legal title and enforceability of property rights, may also inhibit demand for commercial and residential properties. There is risk of over-supply in certain parts of China where property investment, trading and speculation is active. If as a result of any one or more of these or similar factors, demand for commercial and residential properties or market prices decline significantly, the business, financial condition and results of operations of the Enlarged Group could be materially and adversely affected.

The global financial markets have experienced significant slowdown and volatility during the past few years and any continued deterioration may materially and adversely affect the business and results of operations of the Enlarged Group

The economic slowdown and turmoil in the global financial markets starting in the second half of 2008 have resulted in a general tightening of credit, an increased level of commercial and consumer delinquencies, lack of consumer confidence and increased market volatility. The global economic slowdown has also affected the PRC property market, including among other things,

• by reducing the demand for commercial and residential properties resulting in the reduction of property prices;

• by adversely impacting the purchasing power of potential property purchasers, which may further impact the general demand for properties and cause a further erosion of their selling prices; and

• by negatively impacting the ability of property developers and potential property purchasers to obtain financing.

More recently, global market and economic conditions were adversely affected by the credit crisis in Europe, the credit rating downgrade of the United States and in particular, China’s A stock markets in the second half of 2015. These and other issues resulting from the global economic slowdown and financial market turmoil have adversely impacted, and may continue to adversely impact, potential property purchasers, which may lead to a decline in the general demand for the properties of the Enlarged Group and erosion of their selling prices. Any further tightening of liquidity in the global financial markets may negatively affect the liquidity of the Enlarged Group. In addition, the PRC economy grew at a slower pace in 2013 and 2014 than in previous years. If the global economic slowdown and financial crisis continue or become more severe than currently anticipated, or if the PRC economy continues to slow down, the Enlarged Group’s business, financial condition, results of operations and prospects could be materially and adversely affected.

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The Enlarged Group faces intense competition from other real estate developers in the PRC

In recent years, a large number of property developers, including a number of leading PRC, Hong Kong and other overseas developers, have begun undertaking property development and investment projects primarily in the 1st-tier and 2nd-tier cities in the PRC. Some of these developers may have better track records, greater financial, land and other resources, wider brand recognition and greater economies of scale than the Target Group. In the past, the PRC government has introduced various policies and measures in order to limit excessive growth and to curb speculation in the property development sector, which has further increased competition for land among property developers. Please refer to the section headed “Regulatory Overview” set out in Appendix II to this circular for further details of the PRC legal and regulatory provisions relating to the Enlarged Group’s operations and business.

Competition among property developers may result in an increase in land acquisition costs and construction costs, an oversupply of properties, a decrease in rental and property prices in certain regions of the PRC, an inability to lease or sell such properties, a slowdown in the rate at which new property developments are reviewed or approved by the relevant PRC government authorities and an increase in administrative costs of hiring or retaining qualified personnel. In particular, competitors of the Enlarged Group may reduce the prices of their properties as a result of prevailing economic or market conditions, which could result in increased pricing pressure on the Enlarged Group and further restrict the Enlarged Group’s ability to generate revenue. Any of the above factors may adversely affect the Enlarged Group’s business, financial position and results of operations.

The property leasing business of the Enlarged Group also faces significant competition, primarily from properties of a similar grade in their immediate vicinity and also with other properties in their geographical market. The level of competition is affected by various factors, including changes in local, regional and global economic conditions, changes in local, regional and global populations, the supply of and demand for properties, changes in travel patterns/preferences and the level of business activity. The Enlarged Group competes with competitors across a range of factors, including location, capital resources, transportation, infrastructure, government tax and other incentives, design, quality of premises, amenities, breadth and quality of services provided, brand recognition, maintenance and supporting services. The Enlarged Group also competes on sales prices, rental rates and other terms. Existing and prospective customers may consider the competitors’ properties to be superior. As a result, the Enlarged Group may (i) lose current and potential tenants or purchasers to its competitors and have difficulty selling, renewing leases on or re-letting properties; (ii) be forced to reduce its sales prices or rental rates; or (iii) incur additional costs in order to make its properties more attractive than those of their competitors. If the Enlarged Group is unable to compete effectively and consistently, it may not be able to sell or lease its properties on favorable terms, or at all, its occupancy rates may decline and the Enlarged Group may not be able to recover its property development costs.

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Any of the above may adversely affect the business, financial condition and results of operations of the Enlarged Group. In addition, the property markets in China are rapidly changing in response to various external factors beyond the control of the Enlarged Group. If the Enlarged Group fails to adapt to these changes in market conditions or customer preferences more swiftly or effectively than its competitors, the business, financial condition and results of operations of the Enlarged Group could be adversely affected.

The Enlarged Group is exposed to legal risks related to the pre-sale of its properties

Property developers in the PRC are allowed to pre-sell properties prior to their completion. The Enlarged Group depends on cash flows from pre-sales of properties as an important source of funding for its property developments. Under current PRC laws and regulations, property developers must fulfill certain conditions before they can commence pre-sales of the relevant properties and the use and deposit of pre-sales proceeds are also restricted. During the Track Record Period, certain PRC subsidiaries of the Target Group failed to deposit certain of the pre-sales proceeds into the designated custodial accounts in accordance the relevant PRC laws and regulations and the agreements with the relevant regulatory authorities. Please refer to the paragraph headed “Legal Proceedings and Compliance – Compliance” in the section headed “Business of the Target Group” in this circular for details.

As advised by the PRC Legal Advisers to the Company, according to the Administrative Measures for the Pre-sale of Urban Commodity Housing《城市商品房預售 ( 管理辦法》) each of the defaulting subsidiaries of the Target Group is subject to a maximum fine of RMB30,000 for failing to utilise the pre-sale proceeds in accordance with the Administrative Measures for the Pre-sale of Urban Commodity Housing《城市商品房預售 ( 管理辦法》). As at the Latest Practicable Date, the Target Group has not been subject to any order or penalty and no action has been taken by the governmental authorities in relation to the pre-sales proceeds. The Target Group has also received written confirmations from the competent authorities that no penalty will be imposed on the historical non-compliance incidents. However, if the Enlarged Group is required to pay penalty to the relevant government authorities, the Enlarged Group’s business, results of operations and financial position may be materailly and adversely affected.

Further, there can be no assurance that the PRC government will not ban or impose further restrictions on pre-sales in the future. Any ban or additional restrictions on pre-sales may require the Enlarged Group to seek alternative sources of funding to finance its developments, and such alternative funding may not be available to the Enlarged Group on attractive terms, or at all, in which case its cash flow position and prospects, and the business, financial condition and results of operations of the Enlarged Group could be materially and adversely affected.

The Enlarged Group may have to compensate its customers if it fails to meet all requirements pursuant to the pre-sales contracts for the delivery of completed properties

Certain undertakings were given by the Enlarged Group in its pre-sale contracts with the customers. Its pre-sale contracts and PRC laws and regulations provide for

– 148 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS remedies for breach of these undertakings. For example, if the Enlarged Group fails to deliver the development of units which it has pre-sold, it will be liable to the purchasers for their losses. If it fails to complete a pre-sold property on time, its purchasers are entitled to claim compensation for late delivery under either their contracts with the Enlarged Group or the relevant PRC laws and regulations. If the Enlarged Group’s delay extends beyond a specified period, its purchasers may terminate their pre-sale contracts and bring claims for additional compensation. A purchaser may also terminate his or her contract with the Enlarged Group and/or bring claims for compensation for certain other contract disputes, including, for example, if the property registration area of the relevant unit, as set out in the strata-title building ownership certificate, deviates by more than certain percentage from the GFA of that unit as set out in the contract; if the floor plan of the relevant unit is different from what is set out in the contract and adversely affects the quality and functionality of the unit; if the interior decoration of the relevant unit is inferior to what is set out in the contract; or if the purchaser fails to receive the strata-title property ownership certificate within a statutory period due to its fault.

Business of the Enlarged Group will be materially and adversely affected if mortgage financing becomes more costly or otherwise less attractive or available

Most purchasers of the Enlarged Group’s commercial and residential properties rely on mortgages to fund their purchases. An increase in interest rates may significantly increase the cost of mortgage financing and may affect the affordability of commercial and residential properties. The PRC government and commercial banks may also increase down-payment requirements, impose other conditions or otherwise change the regulatory framework in a manner that would make mortgage financing less available or less attractive to potential property purchasers. If the availability or attractiveness of mortgage financing is reduced or limited, many of the prospective customers of the Enlarged Group may not be able to purchase its properties and, as a result, the business, financial condition and results of operations of the Enlarged Group could be materially and adversely affected.

Compliance with PRC laws and regulations regarding environmental protection may result in substantial costs, which may materially and adversely affect the Enlarged Group’s operations and profitability

The Enlarged Group is subject to extensive PRC laws and regulations concerning environmental protection and the preservation of antiquities and historical monuments which impose fines for violation and authorize government authorities to shut down any construction sites that fail to comply with governmental orders requiring the cessation of certain activities causing environmental damage or damage to antiquities or historical monuments. The application of such laws and regulations vary greatly according to a site’s location, its environmental condition, its present and former use, as well as the conditions of its adjoining properties. Such variation in application may result in delays in the project completion of the Enlarged Group and may cause it to incur substantial compliance and other costs and prohibit or severely restrict its project development activities in environmentally or historically sensitive regions or areas. As required by PRC laws and regulations, each project the Enlarged Group develops is required to undergo environmental impact assessments and the related assessment document must be

– 149 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS submitted to relevant government authorities for approval before commencement of construction. However, the environmental impact assessments conducted may not reveal all potential violations of environmental laws or regulations or their full magnitude and there may be material environmental liabilities of which the Target Group is unaware. Furthermore, there is no assurance that the Enlarged Group will be able to comply with all such requirements with respect to environmental assessments or that its policies and procedures will be effective in preventing non-compliance with environmental laws and regulations. If any part of any of its development projects is found to be non-compliant with certain environmental laws or regulations, the Enlarged Group may be subject to suspension of operations or a part of its operations as well as fines and other penalties, which may materially and adversely affect its business, financial condition and results of operations.

There is a growing awareness of environmental issues in the PRC and the Enlarged Group may sometimes be expected to meet more stringent standards than those under applicable environmental laws and regulations. The Enlarged Group has not adopted any special environmental protection measures other than the measures generally taken in the ordinary course of business by comparable companies in its industry. There is no assurance that more stringent requirements on environmental protection will not be imposed by relevant PRC governmental authorities in the future. If the Enlarged Group fails to comply with existing or future environmental laws and regulations or fails to meet public expectations, its reputation may be damaged or the Enlarged Group may be required to pay penalties or fines or take remedial actions, any of which could have a material adverse effect on the business, financial condition and results of operations of the Enlarged Group.

The property development business is subject to claims under statutory quality warranties and other customer claims

All property development companies in the PRC, including the Enlarged Group, must provide certain quality warranties for the properties they construct or sell. The Enlarged Group has never received customer claims in relation to the quality of its projects in the past but there is no assurance that it will not receive customer claims of this nature in the future. Although the Enlarged Group receives quality warranties from its third-party contractors with respect to its property development projects, if a significant number of claims are brought against the Enlarged Group under its warranties and if it is unable to obtain reimbursement for such claims from third-party contractors in a timely manner, or at all, or if the money retained by the Enlarged Group to cover its payment obligations under the quality warranties is not sufficient, the Enlarged Group could incur significant expenses to resolve such claims or face delays in correcting the related defects, which could in turn harm its reputation and could have a material and adverse effect on the business, financial condition and results of operations of the Enlarged Group. In addition, the Enlarged Group may be subject to other types of customer claims from time to time during its ordinary course of business, such as claims in relation to the delay in delivery of property title documents due to various reasons, including a longer time being required for completing relevant procedures than expected or delay in commencing the relevant procedures, including but not limited to the examining procedure by the relevant authorities and the registration, approval and certificate production procedures by the

– 150 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS relevant property right authorities. The Enlarged Group has never received claims from customers for the delay in delivery of property title documents during the Track Record Period, however, there can be no assurance that the Enlarged Group will not face any significant customer claims in the future, which may result in significant expenses to resolve such claims or if it faces delays in remedying the related defects, harm its reputation and adversely affect the business, financial condition and results of operations of the Enlarged Group.

Accidents, injuries or prohibited activities in the investment properties of the Enlarged Group may adversely affect the reputation of the Enlarged Group and subject it to liability

There are inherent risks of accidents, injuries or prohibited activities (such as illegal drug use, gambling, violence or prostitution by guests and infringement of third parties’ intellectual property or other rights by the tenants of the Enlarged Group) taking place in public places, such as shopping malls. The occurrence of one or more accidents, injuries or prohibited activities at any of the investment properties of the Enlarged Group could adversely affect its reputation among customers and guests, harm its brand, decrease its overall rents and occupancy rates and increase its costs by requiring the Enlarged Group to implement additional safeguard measures. In addition, if accidents, injuries or prohibited activities occur at any of its investment properties, the Enlarged Group may be held liable for costs, damages and fines. The current property and liability insurance policies of the Enlarged Group may not provide adequate or any coverage for such losses and it may be unable to renew its insurance policies or obtain new insurance policies without increases in premiums and deductibles or decreases in coverage levels, or at all.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

As all of the Enlarged Group’s operations are or will be conducted in the PRC, any adverse change in the PRC’s economic, political and social conditions and government policies may have a material adverse effect on the Enlarged Group

The Enlarged Group derives most of its revenue from its operations in China as substantially all of its assets and property projects are located in the PRC. Accordingly, the results of operations, financial condition and prospects are subject to economic, political and legal developments in the PRC. The economy of the PRC differs from the economies of most developed countries in many respects, including but not limited to:

• the structure;

• the extent of government involvement;

• the level of development;

• the growth rate;

• the control of foreign exchange; and

• the allocation of resources.

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While economy of the PRC has experienced significant growth in the past 30 years, growth has been uneven across different regions and economic sectors and there is no assurance that such growth can be sustained. If the business environment in the PRC deteriorates as a result of the slowdown in the economic growth of the PRC, the Enlarged Group’s business may be materially adversely affected. Furthermore, although the PRC government has implemented economic reform measures emphasising responsiveness to market forces in the development of the PRC economy, the PRC government continues to play a significant role in regulating industries by imposing industrial policies. Uncertain changes in the PRC’s political and social conditions, laws, regulations, policies and diplomatic relationships with other countries may have material adverse effect on the business or financial condition of the Enlarged Group.

Uncertainties with respect to PRC legal system could materially adversely affect the Enlarged Group

The PRC laws and regulations govern the business operations in the PRC of the Enlarged Group. The PRC legal system is based on written statutes and prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC government has promulgated laws and regulations covering general economic matters. However, many of these laws and regulations are relatively new and evolving, are subject to different interpretations and may be inconsistently implemented and enforced. In addition, only a limited volume of published court decisions may be cited for reference, and such cases have limited precedential value as they are not binding on subsequent cases. The enforcement of such laws may also be uncertain, and it may be difficult to obtain swift and effective enforcement, or to obtain enforcement of a judgment of a court of another jurisdiction. These uncertainties relating to the interpretation, implementation and enforcement of the PRC laws and regulations can affect the legal remedies and protections available, and can adversely affect the value of your investment.

We face uncertainties with respect to the application and enforcement of Circular No. 7 (as defined below) newly promulgated by the PRC State of Administration of Taxation

In February 2015, the PRC State Administration of Taxation has promulgated the Announcement on Certain Issues Concerning Enterprise Income Tax for Indirect Transfer of Assets by Non-resident Enterprises《關於非居民企業間接轉讓財產企業所得稅若干問題 ( 的公告》) (Circular No. 7 by State Administration of Taxation in 2015) (or “Circular No. 7”), which abolished certain provisions in the Notice on Strengthening the Administration of Enterprises Income Tax on Non-Resident Enterprises《關於加強非中國居民企業股權轉讓 ( 所得企業所得稅管理的通知》) (Guoshui Han [2009] Circular No. 698) (or “Notice No. 698”) issued by the PRC State Administration of Taxation in December 2009, and provided clarification on Notice No. 698. In short, Circular No. 7 provides comprehensive guidelines relating to and heightens the PRC tax authorities’ scrutiny over indirect transfers by a non-resident enterprise of assets (including equity interests) of PRC resident enterprises.

Under Circular No. 7, when a non-resident enterprise (not including individuals or PRC resident enterprises) transfers the assets (including equity interests) in an overseas holding company, which directly or indirectly owns PRC taxable properties (“PRC

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Taxable Assets”), including shares in a PRC company, for the purposes of avoiding PRC enterprise income taxes through an arrangement without reasonable commercial purpose, such indirect transfer should be reclassified and recognized to be a direct transfer of the assets (including equity interests) of a PRC resident enterprise in accordance with the Enterprise Income Tax Law, unless the overall arrangements relating to an indirect transfer of PRC Taxable Assets fulfill one of the following conditions:

(i) where a non-resident enterprise derives income from the indirect transfer of PRC Taxable Assets by acquiring and selling equity interests of a listed overseas company on a public market; and

(ii) where the non-resident enterprise had directly held and transferred such PRC Taxable Assets, the income from the transfer of such PRC Taxable Assets would have been exempted from enterprise income tax in the PRC under an applicable tax treaty or arrangement.

With respect to the Acquisition, it involves the proposed transfer by the Vendor, which is a company incorporated in the BVI and thus a non-resident enterprise within the meaning of Circular No. 7, of the entire issued share capital of the Target Company which is indirectly interested in the equity interests in its various subsidiaries in the PRC and accordingly, the Acquisition is likely to be subject to Circular No. 7 but how Circular No. 7 will be applied to the Acquisition and the parties involved in the sale and purchase of the [REDACTED] as well as the potential tax liabilities, if any, will be subject to the decision and practice of the PRC tax authorities after completion of the Acquisition and cannot be assessed before the Completion. If our Company or the Purchaser is required by the PRC tax authorities to bear substantial amount of tax liabilities after the Completion, our business, financial condition, results of operations and prospects may be adversely affected.

On the other hand, a Shareholder buying and selling our Shares on a public market after completion of the Acquisition and the Listing is unlikely to be considered to indirectly transfer equity interest or other assets in any of our PRC subsidiaries held by our Company. Although the exemptions mentioned above are clarified in Circular No. 7, as Circular No. 7 was newly implemented and only became effective in February 2015, there is limited guidance and practical experience regarding the application and enforcement of Circular No. 7 and the related notices of PRC State Administration of Taxation and it remains uncertain whether such exemptions will be applicable to the transfer of our Shares or whether any future acquisition by us outside of the PRC involving PRC Taxable Assets will be reclassified by applying Circular No. 7. Therefore, the PRC tax authorities may deem any transfer of our Shares by our Shareholders that are non-resident enterprises, or any future acquisition by us outside of the PRC involving PRC Taxable Assets, to be subject to the foregoing regulations, which may subject our Shareholders or us to additional PRC tax reporting obligations or tax liabilities. Any such outcome could have a material adverse effect on our business, financial condition, results of operations and prospects.

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The Company is an investment holding company that relies on dividend payments from its subsidiaries for funding

The Company is a holding company incorporated in Bermuda and, upon Completion, the operations of the Enlarged Group will be primarily conducted through its subsidiaries established in the PRC. Hence, the availability of funds to pay dividends to the Shareholders and to service the Company’s indebtedness depends on dividends received from these subsidiaries. If the subsidiaries incur any debts or losses, such indebtedness or loss may impair their ability to pay dividends or other distributions to the Company. As a result, the Company’s ability to pay dividends or other distributions and to service its debts will be restricted.

According to the PRC laws, dividends to be paid out of the net profit are required to be calculated according to the PRC accounting principles, which, in many aspects, differ from the generally accepted accounting principles in other jurisdictions. The Enlarged Group’s subsidiaries in the PRC, as foreign-invested enterprises, are required to set aside part of their net profits as statutory reserves, which are not available for distribution as cash dividends. Such dividends are also subject to the PRC withholding tax.

Control of foreign currency conversion and fluctuations in the value of the RMB may materially and adversely affect the Enlarged Group

Upon Completion, substantially most of the revenue of the Enlarged Group will be generated in the PRC and in RMB, as RMB is not a freely convertible currency, the Company will have to convert RMB into Hong Kong dollars and such other foreign currencies for paying dividends to the Shareholders and services its indebtedness. Currently, conversion and remittance of foreign currencies are subject to PRC foreign exchange regulations. In general, the Enlarged Group’s subsidiaries in the PRC, as foreign investment enterprises, are permitted to convert RMB to foreign currencies for current account transactions (including, for example, distribution of profits and payment of dividends to foreign investors) through designated foreign exchange banks following prescribed procedural requirements. Control over conversion of RMB into foreign currencies for capital account transactions (including, for example, direct investment, loan and investment in securities) is more stringent and such conversion is subject to a number of limitations. The requirement for the Company to pay dividends in a currency other than RMB to the Shareholders may expose the Company to foreign exchange risk. Under the current foreign exchange control system, there is no assurance that the Company will be able to obtain sufficient foreign currency to pay dividends or satisfy other foreign exchange requirements in the future.

The exchange rates of the RMB against the Hong Kong dollar, the US dollar and other foreign currencies fluctuate and are affected by, among other things, the policies of the PRC government and changes in the PRC’s and global political and economic conditions. There is significant international pressure on the PRC government to adopt a more flexible currency policy, which, together with domestic policy considerations, could result in a further and more significant appreciation of RMB against the Hong Kong dollar, the US dollar or other foreign currencies. As the Enlarged Group needs to convert future financing into RMB for its operations, the continued appreciation of RMB against the

– 154 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS relevant foreign currencies would reduce the RMB amount the Enlarged Group would receive from the conversion. On the other hand, any devaluation of RMB against the relevant foreign currencies may also lead to an increase in costs of business which would adversely affect the Enlarged Group’s results of operations and financial condition, reducing the amount of any cash dividends on the Shares.

The investment properties of the Enlarged Group are located on land that is under long-term land use rights granted by the PRC government. There is uncertainty about the amount of the land grant premium that the Enlarged Group will have to pay and additional conditions that may be imposed if it decides to seek an extension of the land use rights for its investment properties

The investment properties of the Enlarged Group are held under land use rights granted by the PRC government. Under PRC laws, the maximum term of the land use rights is 40 years for commercial use purposes and 50 years for mixed-use purposes. Upon expiration, the land use rights will revert to the PRC government unless the holder of the land use rights applies for and is granted an extension of the term of the land use rights.

These land use rights do not have automatic rights of renewal and holders of land use rights are required to apply for extensions of the land use rights one year prior to the expiration of their terms. If an application for extension is granted (and such grant would usually be given by the PRC government unless the land in issue is to be taken back for the purpose of public interests), the holder of the land use rights will be required to, among other things, pay a land grant premium. If no application is made, or if such application is not granted, the properties under the land use rights will be reverted to the PRC government without any compensation. As none of the land use rights granted by the PRC government which are similar to those granted for the investment properties of the Enlarged Group has run its full term, there is no precedent to provide an indication of the amount of the land grant premium which the Enlarged Group will have to pay and any additional conditions which may be imposed if the Enlarged Group decides to seek an extension of the land use rights for the investment properties of the Enlarged Group upon the expiry thereof.

In certain circumstances, the PRC government may, where it considers it to be in the public interest, terminate land use rights before the expiration of the term. In addition, the PRC government has the right to terminate long-term land use rights and expropriate the land in the event the grantee fails to observe or perform certain terms and conditions pursuant to the land use rights grant contracts. If the PRC government charges a high land grant premium, imposes additional conditions, or does not grant an extension of the term of the land use rights of any of its investment properties, the operations and business of the Enlarged Group could be disrupted, and the business, financial condition and results of operations of the Enlarged Group could be materially and adversely affected.

Investors may experience difficulties in effecting service of process, enforcing foreign judgments or bringing original actions in the PRC against the Enlarged Group or its Directors

The Company is incorporated under the laws of Bermuda, but substantially all of the operations and assets of the Enlarged Group are located in the PRC. As a result, it may

– 155 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS be difficult or impossible for investors to effect service of process on the Enlarged Group. Moreover, the PRC does not have treaties with most other jurisdictions that provide for the reciprocal recognition and enforcement of judicial rulings and awards. As a result, recognition and enforcement in the PRC of the judgment of a non-PRC court in relation to any matter not subject to a binding arbitration provision may be difficult or impossible. Judgments obtained in a Hong Kong court may be enforced in the PRC, provided that certain conditions are satisfied. However, there are uncertainties as to the outcome of any applications to recognize and enforce such judgments in the PRC.

Furthermore, an original action may be brought in the PRC against the Enlarged Group or its Directors only if the actions are not required to be arbitrated by PRC law and upon satisfaction of the conditions for institution of a cause of action pursuant to the PRC Civil Procedure Law. As a result of the conditions set forth in the PRC Civil Procedure Law and the discretion of PRC courts to determine whether the conditions are satisfied and whether to accept the action for adjudication, there remains uncertainty on whether an investor like you will be able to bring an original action in the PRC in this fashion.

Natural disasters, epidemics, acts of war or terrorism or other factors beyond control in the future may have a material adverse effect on the Enlarged Group’s business operations, financial condition and results of operations

Natural disasters, epidemics, acts of war or terrorism or other factors beyond the control of the Enlarged Group may adversely affect the economy, infrastructure and livelihood of the people in the regions the business of the Enlarged Group is conducted, which in turn may have an adverse impact on domestic consumption and, possibly, on its overall GDP growth. As most of the Enlarged Group’s revenue is derived from its operations in the PRC, any contraction or slowdown in the growth of domestic consumption or slowdown in the growth of GDP may materially and adversely affect the financial condition, results of operations and future growth of the Enlarged Group. In addition, if employees are affected by a severe communicable disease, the Enlarged Group may be required to institute measures to prevent the spread of the disease. The spread of any severe communicable disease in the PRC may also affect the operations of the Enlarged Group’s general contractors and construction service providers.

The regions where the Enlarged Group operates may also be under the threat of typhoon, tornado, snowstorm, earthquake, flood, drought, power shortages or failures, or are susceptible to epidemics, such as Severe Acute Respiratory Syndrome (SARS), avian influenza, H1N1 influenza, H5N1 influenza, H7N9 influenza or H3N2 influenza, Middle East Respiratory Syndrome Coronavirus (MERS), potential wars or terrorist attacks, riots, disturbances or strikes. Any future natural disasters, public health and public security hazards or acts of war or terrorism may, among other things, materially and adversely affect or disrupt the Enlarged Group’s operations and the progress of its projects. Furthermore, such natural disasters, public health and public security hazards or acts of war or terrorism may severely restrict the level of economic activity in affected areas, which may in turn materially and adversely affect the business, results of operations and prospects of the Enlarged Group.

– 156 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. RISK FACTORS

RISKS RELATING TO THIS CIRCULAR

Certain statistics and other information relating to the economy and the PRC property development industry contained in this circular were derived from various official sources and government publications and have not been independently verified and may not be reliable

Statistics, industry data and other information relating to the economy and the PRC property development industry contained in this circular have been derived from various official government publications with information provided by the PRC and other government agencies. As such statistics, data and information were obtained from official government sources, the Company or its Directors, agents and advisers cannot assure you or make any representation as to the accuracy or completeness of such information and statistics. None of the Company, the Joint Sponsors or any of their respective affiliates, directors, employees, agents or advisers have prepared or independently verified the accuracy or completeness of such information directly or indirectly derived from official government sources. Due to possible flawed collection methods, discrepancies in published information, different market practices or other problems, the statistics, industry data and other information relating to the economy and the industry derived from official government sources might be inaccurate or might not be comparable to statistics produced from other sources and should not be unduly relied upon. Shareholders should give careful consideration as to how much weight or importance to attach or place on such statistics, projected industry data and other information relating to the economy and the industry.

– 157 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

HISTORY AND DEVELOPMENT

The history of the Target Group is traced back to October 2009, when Jilin Ground Real Estate, a wholly-owned subsidiary of the Target Company, was established. The key business milestones of the Target Group are set forth below:

2009 – Establishment of Jilin Ground Real Estate

2010 – Acquisition of the Target Group’s first parcel of land from Jilin City Land Resources Bureau

– Commencement of the construction of the first property project – Guangze•Amethyst City (廣澤‧紫晶城)

– Guangze•Amethyst City (廣澤‧紫晶城) was awarded the ”Driven Property 2010” (2010 年推動力獎)andthe”Top10 Residential Value Property” (十大居住價值樓盤) by China Real Estate Business (房地產報), the “Real Estate Developers’ Reputation Ranking – Top Selling Property of the Year 2010” (2010年房地產口碑榜年度熱銷樓盤) and the “Real Estate Developers’ Reputation Ranking – Green Residential-Friendly Property 2010” (2010年房地產口碑榜綠色宜居樓盤) by the China Real Estate Annual Overall Rating – Jilin (中國房地產總評榜吉林分榜)

2012 – Commencement of the construction of the first integrated commercial complex – Guangze International Shopping Centre (廣澤國際購物中心)

2013 – Commencement of the construction of Guangze•Tudors Palace (廣澤‧瀾香)

Completion of construction of Phase I of Guangze•Amethyst City (廣澤‧紫晶城)

2014 – Commencement of the construction of Guangze Red House (廣澤紅府) and Guangze China House (廣澤蘭亭)

2015 – Ground Real Estate was awarded the “2015 China Real Estate Top 200” (2015中國房地產開發企業200強) by the China Real Estate Association (中國房地產房委員會), the China Real Estate Industry Association (中國房地產業協會) and China Real Estate Evaluation Centre (中國房地產測評中心)

– 158 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

The Target Company has one wholly-owned Hong Kong subsidiary, 14 wholly-owned PRC subsidiaries and 6 non wholly-owned PRC subsidiaries. The major equity changes of the Target Group Companies are summarised as follows:

Ka Yun

For details of this entity, please refer to the paragraph headed “Details of the Reorganisation” in this section.

Xin Rui

For details of this entity, please refer to the paragraph headed “Details of the Reorganisation” in this section.

Jilin Xinrui

For details of this entity, please refer to the paragraph headed “Details of the Reorganisation” in this section.

Jilin Rongli

For details of this entity, please refer to the paragraph headed “Details of the Reorganisation” in this section.

Jilin Rongyu

For details of this entity, please refer to the paragraph headed “Details of the Reorganisation” in this section.

Ground Real Estate

Ground Real Estate was established in the PRC as a limited liability company on 26 November 2010 with an initial registered capital of RMB100,000,000. Since the time of its establishment, it had been held as to 70% by Ground Investment Holding, 15% by Jilin Dongxiu and 15% by Changchun Dongxiu. The registered capital of Ground Real Estate was increased to RMB110,000,000 and RMB200,000,000 on 17 June 2011 and 12 June 2012 respectively, all of which have been fully paid up. The registered capital of Ground Real Estate was further increased to RMB400,000,000 on 13 May 2015, all of which has been fully paid up pursuant to which Ground Real Estate became held by Ground Investment Holding, Jilin Dongxiu and Changchun Dongxiu as to 85%, 7.5% and 7.5%, respectively. On 14 May 2015, Ground Investment Holding entered into an equity transfer agreement with Jilin Rongyu, pursuant to which Ground Investment Holding agreed to transfer its equity interest of 85% in Ground Real Estate to Jilin Rongyu at a consideration of RMB340,000,000. On the same day, Jilin Dongxiu and Changchun Dongxiu each entered into an equity transfer agreement with Jilin Rongli, pursuant to which Jilin Dongxiu and Changchun Dongxiu each agreed to transfer its equity interest of 7.5% in Ground Real Estate to Jilin Rongli at a consideration of RMB30,000,000. Immediately after

– 159 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

the above equity transfers, Jilin Rongyu and Jilin Rongli owned 85% and 15% of Ground Real Estate, respectively. The permitted scope of business of Ground Real Estate includes property development and sales via 16 subsidiaries as set out below. Apart from such equity interest, Ground Real Estate does not have any other substantial assets or liabilities.

As at the Latest Practicable Date, the subsidiaries held by Ground Real Estate are as set out below.

Changchun Zhujia

Changchun Zhujia, a direct wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 7 December 2010 with a registered capital of RMB10,000,000, which has been fully paid up. The permitted scope of business of Changchun Zhujia includes property development and sales.

Jilin Kegao

Jilin Kegao, a direct wholly-owned subsidiary of Ground Real Estate, was established in the PRC on 4 January 2011 with a registered capital of RMB10,000,000, which has been fully paid up. The permitted scope of business of Jilin Kegao includes property development and sales.

Jilin Ground Real Estate

Jilin Ground Real Estate, a direct wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 22 October 2009 with an initial registered capital of RMB100,000,000, which has been fully paid up. Immediately upon the fully paid-up of the then registered capital on 8 April 2010, it was held as to 83% by Ms. Cui, 10% by Mr. Wang Shouwen (“Mr. SW Wang”) and 7% by Ms. Wang Lihua (“Ms. Wang”). Jilin Ground Real Estate is an operating subsidiary and its permitted scope of business includes property development.

On 18 May 2010, Ms. Cui entered into an equity transfer agreement with Mr. Ren Shuaiheng (任帥衡)(“Mr. Ren”), pursuant to which Ms. Cui agreed to sell her 1% equity interest in Jilin Ground Real Estate to Mr. Ren at a consideration of RMB1,000,000. The consideration for this equity transfer was determined with reference to the then registered capital of Jilin Ground Real Estate. Upon completion of the above equity transfer, Ms. Cui, Mr. SW Wang, Ms. Wang and Mr. Ren owned 82%, 10%, 7% and 1% of the equity interest in Jilin Ground Real Estate, respectively.

On 22 December 2010, Ms. Cui entered into an equity transfer agreement with Ground Real Estate, pursuant to which Ms. Cui agreed to transfer her entire equity interest in Jilin Ground Real Estate to Ground Real Estate at a consideration of RMB82,000,000. The consideration for this equity transfer was determined with reference to the registered capital of Jilin Ground Real Estate. Immediately after the above equity transfer, Ground Real Estate, Mr. SW Wang, Ms. Wang and Mr. Ren owned 82%, 10%, 7% and 1% of the equity interest in Jilin Ground Real Estate, respectively.

– 160 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

On 29 December 2010, Mr. SW Wang entered into an equity transfer agreement with Zhi Wen Investment, pursuant to which Mr. SW Wang agreed to transfer his entire equity interest, representing 10% of the equity interest, in Jilin Ground Real Estate to Zhi Wen Investment at a consideration of RMB10,000,000. The consideration for this equity transfer was determined with reference to the registered capital of Jilin Ground Real Estate of RMB100,000,000. On the same day, Ms. Wang entered into an equity transfer agreement with Shanxi Tian Jian Automobile, pursuant to which Ms. Wang agreed to sell her entire equity interest, representing 7% of the equity interest, in Jilin Ground Real Estate to Shanxi Tian Jian Automobile, at a consideration of RMB7,000,000. The consideration for this equity transfer was determined with reference to the registered capital of Jilin Ground Real Estate of RMB100,000,000.

On 15 April 2015, Ground Real Estate entered into a registered capital transfer agreement each with Shanxi Tian Jian Automobile, Zhi Wen Investment and Mr. Ren, pursuant to which Shanxi Tian Jian Automobile, Zhi Wen Investment and Mr. Ren agreed to sell their entire equity interest, representing 7%, 10% and 1% in Jilin Ground Real Estate respectively to Ground Real Estate at a consideration of RMB7,000,000, RMB10,000,000 and RMB1,000,000 respectively. The consideration for these equity transfers was determined with reference to the registered capital of Jilin Ground Real Estate. As a result, Jilin Ground Real Estate became a direct wholly-owned subsidiary of Ground Real Estate.

Jilin Zhujia

Jilin Zhujia, a direct wholly-owned subsidiary of Ground Real Estate, was established as a limited liability company in the PRC on 28 February 2011 with a registered capital of RMB10,000,000. The permitted scope of business of Jilin Zhujia includes property development and leasing.

On 17 May 2011, Ground Real Estate entered into an equity transfer agreement with Jilin Ground Equity, pursuant to which Ground Real Estate agreed to transfer its 40% equity interest in Jilin Zhujia to Jilin Ground Equity at a consideration of RMB4,000,000. The consideration for the equity transfer was determined with reference to the registered capital of Jilin Zhujia. As a result of the above equity transfer, Ground Real Estate and Jilin Ground Equity owned 60% and 40% of the equity interest in Jilin Zhujia, respectively.

On 15 April 2015, Ground Real Estate and Jilin Ground Equity entered into an equity transfer agreement, pursuant to which Jilin Ground Equity agreed to transfer its 40% equity interest in Jilin Zhujia to Ground Real Estate at a consideration of RMB4,000,000. The consideration for the equity transfer was determined with reference to the registered capital of Jilin Zhujia. As a result, Jilin Zhujia became a direct wholly owned subsidiary of Ground Real Estate.

On 8 May 2015, Ground Real Estate and Jilin Guangze Tourism Investment entered into an equity transfer agreement, pursuant to which Ground Real Estate agreed to transfer its entire equity interest in Jilin Zhujia to Jilin Guangze Tourism

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Investment at a consideration of RMB10,000,000. The consideration for the equity transfer was determined with reference to the registered capital of Jilin Zhujia. As a result, Jilin Zhujia became a direct wholly owned subsidiary of Jilin Guangze Tourism Investment.

On 4 June 2015, Jilin Guangze Tourism Investment and Ground Real Estate entered into an equity transfer agreement, pursuant to which Jilin Guangze Tourism Investment agreed to transfer its entire equity interest in Jilin Zhujia to Ground Real Estate at a consideration of RMB10,000,000. The consideration for the equity transfer was determined with reference to the registered capital of Jilin Zhujia. As a result, Jilin Zhujia became a direct wholly owned subsidiary of Ground Real Estate.

Baishan Ground Real Estate

Baishan Ground Real Estate was established in the PRC as a limited liability company on 8 August 2011 with an initial registered capital of RMB50,000,000, which has been fully-paid up. At the time of its establishment, it had a paid-up share capital of RMB20,000,000, contributed by Jilin Ground Equity. The permitted scope of business of Baishan Ground Real Estate includes property development, decoration, sale and rental of commercial property, sales, gold jewelry, jewelry, garments, daily goods (excluding fireworks and firecrackers), office supplies, furniture, household appliances, native products, agricultural products, arts and crafts, hardware and building materials (excluding wood), textiles, cosmetics, private car parking space rental, design, production, agency advertising, convention and exhibition services, market research and car rental.

On 17 April 2015, Ground Real Estate acquired the entire equity interest held by Jilin Ground Equity in Baishan Ground Real Estate at a consideration of RMB20,000,000. The consideration for the equity transfer was determined with reference to the registered capital of Baishan Ground Real Estate. As a result, Baishan Ground Real Estate became a direct wholly-owned subsidiary of Ground Real Estate.

Yanji Huize

Yanji Huize, a direct wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 24 May 2012 with a registered capital of RMB50,000,000, which has been fully paid up. The permitted scope of business of Yanji Huize includes property development and sales.

Jilin Ground Property Investment

Jilin Ground Property Investment, a direct wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 4 July 2012 with a registered capital of RMB2,000,000, which has been fully paid up. The permitted scope of business of Jilin Ground Property Investment includes investment with its own financial resources, investment advisory and management.

– 162 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

Jilin Ground Property Investment owns the entire equity interest in Jilin Ground Property Services, Baishan Ground Property Services and Baishan Ground Business Management.

Jilin Ground Property Services

Jilin Ground Property Services was established in the PRC as a limited liability company on 29 September 2010 with a registered capital of RMB500,000, which has been fully paid up. At the time of its establishment, Jilin Ground Property Services was wholly-owned by Jilin Guangze Group. On 11 January 2011, Jilin Guangze Group and Ground Real Estate entered into a registered capital transfer agreement, pursuant to which Jilin Guangze Group transferred its entire equity interest in Jilin Ground Property Services to Ground Real Estate at a consideration of RMB500,000. The consideration for the equity transfer was determined with reference to the registered capital of Jilin Ground Property Services. Upon completion of the above equity transfer, Ground Real Estate owned the entire equity interest in Jilin Ground Property Services.

On 30 September 2012, Ground Real Estate and Jilin Ground Property Investment entered into an equity transfer agreement, pursuant to which Ground Real Estate transferred its entire equity interest in Jilin Ground Property Services to Jilin Ground Property Investment at a consideration of RMB500,000. The consideration for the equity transfer was determined with reference to the registered capital of Jilin Ground Property Services. Upon completion of the above equity transfer, Jilin Ground Property Services became the wholly-owned subsidiary of Jilin Ground Property Investment.

On 24 February 2014, Jilin Ground Property Services increased its registered capital from RMB500,000 to RMB3,000,000, which has been fully paid up. The permitted scope of business of Jilin Ground Property Services includes property services, sale of commercial property and property leasing.

Jilin Ground Property Services has three branch offices, namely吉林市廣澤物業服務有限公司延吉分公司(Jilin Ground Property Services (Yanji Branch)*), 吉林市廣澤物業服務有限公司白山分公司 (Jilin Ground Property Services (Baishan Branch)*) and吉林市廣澤物業服務有限公司白山國購分公司 (Jilin Ground Property Services (Guangze International Shopping Centre Branch)*).

Baishan Ground Property Services

Baishan Ground Property Services, an indirect wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 24 June 2013 with a registered capital of RMB500,000, which has been fully paid. Since its establishment, Baishan Ground Property Services has been wholly-owned by Jilin Ground Property Investment. The permitted scope of business of Baishan Ground Property Services includes property services.

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Baishan Ground Business Management

Baishan Ground Business Management, an indirect wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 25 December 2012 with a registered capital of RMB500,000, which has been fully paid up. At the time of its establishment, Baishan Ground Business Management was wholly-owned by Jilin Modern Construction. The permitted scope of business of Baishan Ground Business Management includes business management, commercial property leasing, sales, gold jewelry, jewelry, clothing, footwear, department stores, office supplies, furniture, household appliances, native products, agricultural products, handcrafts, metal materials, textiles, pharmaceuticals, cosmetics, food, catering, children’s entertainment, private car parking space rental, production, agents, advertising, convention and exhibition services, market research and car rental.

On 25 December 2014, Jilin Ground Property Investment entered into an equity transfer agreement to acquire the entire equity interest in Baishan Ground Business Management held by Jilin Modern Construction at a consideration of RMB500,000. The consideration for the equity transfer was determined with reference to the registered capital of Baishan Ground Business Management. As a result of the above equity transfer, Baishan Ground Business Management is now wholly-owned by Jilin Ground Property Investment.

Jilin Ground Tourism Investment

Jilin Ground Tourism Investment was established in the PRC as a limited liability company on 25 January 2013 with a registered capital of RMB10,000,000, which has been fully paid up. At the time of its establishment, Jilin Ground Tourism Investment was wholly-owned by Ground Investment Holding. The permitted scope of business of Jilin Ground Tourism Investment includes tourist information, tourism product development and tourism project management.

On 3 February 2013, Ground Investment Holding entered into an equity transfer agreement with Goodyear International Capital Limited (創興國際資本有限公司)(“Goodyear”), a wholly-owned subsidiary of the Company, pursuant to which Ground Investment Holding agreed to sell its 35% equity interest in Jilin Ground Tourism Investment to Goodyear at a consideration RMB3,500,000. The consideration for this equity transfer was determined with reference to the then registered capital of Jilin Ground Tourism Investment of RMB10,000,000. Upon completion of the above equity transfer, Jilin Ground Tourism Investment was held as to 65% by Ground Investment Holding and 35% by Goodyear.

On 22 February 2014, Ground Investment Holding entered into an equity transfer agreement with Ground Real Estate, pursuant to which Ground Investment Holding agreed to sell its entire equity interest, representing 65% of the equity interest, in Jilin Ground Tourism Investment to Ground Real Estate at a consideration RMB6,500,000. The consideration for this equity transfer was determined with reference to the registered capital of Jilin Ground Tourism

– 164 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

Investment of RMB10,000,000. As a result of the above equity transfer, Jilin Ground Tourism Investment is now held as to 65% by Ground Real Estate and 35% by Goodyear.

Jilin Ground Tourism Investment owns the entire equity interest in Fusong Changbaishan.

Fusong Changbaishan

Fusong Changbaishan, an indirect non wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 21 December 2011 with a registered capital of RMB10,000,000, which has been fully paid up. At the time of its establishment, Fusong Changbaishan was wholly-owned by Ground Investment Holding. The permitted scope of business of Fusong Changbaishan includes tourist development, tourism project management and tourism information enquiry services.

On 26 January 2013, Ground Investment Holding entered into an equity transfer agreement with Jilin Ground Tourism Investment, pursuant to which Ground Investment Holding agreed to sell its entire equity interest in Fusong Changbaishan to Jilin Ground Tourism Investment at a consideration RMB10,000,000. The consideration for this equity transfer was determined with reference to the registered capital of Fusong Changbaishan of RMB10,000,000. As a result of the above equity transfer, Fusong Changbaishan is now wholly-owned by Jilin Ground Tourism Investment.

Fusong Changbaishan owns the entire equity interest in Fusong Ground.

Fusong Ground

Fusong Ground, an indirect non wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 6 July 2012 with a registered capital of RMB10,000,000, which has been fully paid up. At the time of its establishment, Fusong Ground was wholly-owned by Ground Real Estate. The permitted scope of business of Fusong Ground includes real estate development.

On 19 December 2012, Ground Real Estate entered into an equity transfer agreement with Fusong Changbaishan, pursuant to which Ground Real Estate agreed to sell its entire equity interest in Fusong Ground to Fusong Changbaishan at a consideration RMB10,000,000. The consideration for this equity transfer was determined with reference to the registered capital of Fusong Ground of RMB10,000,000. As a result of the above equity transfer, Fusong Ground is now wholly-owned by Fusong Changbaishan.

Fusong Ground owns the entire equity interest in Fusong Guosong Conference and Fusong Guosong Specialty.

– 165 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP

Fusong Guosong Conference

Fusong Guosong Conference, an indirect non wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 26 October 2012 with a registered capital of RMB500,000, which has been fully paid up. Since its establishment, Fusong Guosong Conference has been wholly-owned by Fusong Ground. The permitted scope of business of Fusong Guosong Conference includes conference services.

Fusong Guosong Specialty

Fusong Guosong Specialty, an indirect non wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 26 October 2012 with a registered capital of RMB500,000, which has been fully paid up. Since its establishment, Fusong Guosong Specialty has been wholly-owned by Fusong Ground. The permitted scope of business of Fusong Guosong Specialty includes the sale of native goods.

Jilin Ground Hotel Management

Jilin Ground Hotel Management, an indirect non wholly-owned subsidiary of Ground Real Estate, was established in the PRC as a limited liability company on 18 November 2014. It has a registered capital of RMB500,000, which has been fully paid up by Fusong Ground. The permitted scope of business of Jilin Ground Hotel Management includes hotel management, corporate management consultancy, hotel information inquiry and hotel management training.

Disposals and Deregistration

In October 2012, the Target Group established four subsidiaries in Jilin Province of the PRC namely 撫松果松旅遊有限公司 (Fusong Guosong Tourism Company Limited*), 撫松民眾旅行社有限公司 (Fusong Public Travel Services Company Limited*), 撫松果松娛樂有限公司 (Fusong Guosong Entertainment Company Limited*) and 撫松東崗餐飲有限公司 (Fusong Donggong Beverage Company Limited*) with the original goal to tap into the markets of tourism, entertainment and food and beverages. The then intention of the Target Group was to position the services of these subsidiaries as complementary to the commercial and tourism property projects developed by the Target Group. Since their respective dates of incorporation, none of the deregistered subsidiaries has commenced business. Nevertheless, in view of the costs and possible diversion of efforts and manpower of the Target Group into these businesses, the Target Group decided to deregister these four subsidiaries in August 2014. As advised by the PRC legal adviser to the Company, the deregistration has obtained all necessary approvals.

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CORPORATE STRUCTURE OF THE TARGET GROUP PRIOR TO THE REORGANISATION

Ms. Chai

100%

Charm Success Public Shareholders (BVI) 65% 35%

The Company

Ms. Cui

Jilin Dongxiu Changchun Dongxiu (Note) (Note) 41.67% 13.89%

Ground Investment Holding (Note)

15% 70% 15%

Ground Real Estate

100% 100% 82% 60% 60% 100% 100% 65% 35% Ba J i i J shan Gro

l Jilin Ground Tourism Investment i i Changch l n Gro i n Gro J Yan In J i i l 100% l i u v i n Kegao n u estment nd Real ji u nd Property Z H u nd Real h n Fusong Changbaishan ui uji Z ze h a uji E 100% state E a state Fusong Ground

100% 100% 100%100% 100% J i Hotel Management l Property i F F n Gro Ba u u J Conference song G song G i i l shan Gro S i S n Gro pec er u nd Property vi i S alty ces u u er u osong osong nd vi u ces nd

Note: Each of Jilin Dongxiu, Changchun Dongxiu and Ground Investment Holding holds the equity interest of Ground Real Estate as a nominee of Ms. Cui pursuant to the Confirmatory Deed.

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REORGANISATION PLAN OF THE TARGET GROUP

In preparation for the Acquisition, Ms. Cui has carried out certain reorganisation steps to form the Target Group for the purpose of the sale of the [REDACTED] under the Sale and Purchase Agreement. The Reorganisation involved the following steps:

(a) incorporation of Ka Yik, the Vendor;

(b) incorporation of Ka Yun;

(d) incorporation of Jilin Xinrui;

(e) incorporation of Jilin Rongli;

(f) incorporation of Jilin Rongyu;

(g) acquisition of equity interest in Baishan Ground Real Estate by Ground Real Estate from Jilin Ground Equity;

(h) acquisition of equity interest in Jilin Zhujia by Ground Real Estate from Jilin Guangze Tourism Investment;

(i) acquisition of equity interest in Jilin Ground Real Estate by Ground Real Estate from Mr. Ren, Shanxi Tian Jian Automobile and Zhi Wen Investment;

(j) acquisition of the entire equity interest in Baishan Ground Business Management by Jilin Ground Property Investment from Jilin Modern Construction;

(k) acquisition of equity interest in Ground Real Estate by Jilin Rongli from Jilin Dongxiu and Changchun Dongxiu; and

(l) acquisition of equity interest in Ground Real Estate by Jilin Rongyu from Ground Investment Holding.

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DETAILS OF THE REORGANISATION

(a) Incorporation of Ka Yik, the Vendor

On 4 April 2014, the Vendor for the purpose of the Acquisition was incorporated in the BVI and authorised to issue a maximum of 50,000 shares of a single class each with a par value of US$1.00 each, of which 1 share was subscribed at par by Ms. Cui.

(b) Incorporation of Ka Yun

On 4 April 2014, Ka Yun was incorporated in the BVI and authorised to issue a maximum of [REDACTED] shares of a single class each with a par value of US$1.00 each, of which 1 share was subscribed at par by Ka Yik. Ka Yun further issued [REDACTED]to Ka Yik. Ka Yun is principally engaged in investment holding.

On 7 April 2014, Xin Rui Investments Limited was incorporated in Hong Kong with paid up capital of HK$1.00 for one share issued and subscribed by Acota Services Limited. On 17 April 2014, the 1 fully paid share of Xin Rui held by Acota Services Limited was transferred to Ka Yun at a consideration of HK$1.00. Xin Rui is principally engaged in investment holding.

(d) Incorporation of Jilin Xinrui

On 16 December 2014, Jilin Xinrui was established in the PRC as a limited liability company wholly invested by Xin Rui. Jilin Xinrui had a registered capital of HK$1,000,000, and a total amount of investment of HK$1,000,000. Jilin Xinrui is principally engaged in corporate management services.

(e) Incorporation of Jilin Rongli

On 29 December 2014, Jilin Rongli was established in the PRC as a limited liability company wholly invested by Jilin Xinrui, a wholly foreign-owned enterprise. Jilin Rongli had a registered capital of RMB20,000,000, and no investment amount has been paid up. Jilin Rongli is principally engaged in investment and asset management.

(f) Incorporation of Jilin Rongyu

On 29 December 2014, Jilin Rongyu was established in the PRC as a limited liability company wholly invested by Jilin Xinrui, a wholly foreign-owned enterprise. Jilin Rongyu had a registered capital of RMB20,000,000, and no investment amount has been paid up. Jilin Rongyu is principally engaged in investment and asset management.

(g) Acquisition of equity interest in Baishan Ground Real Estate by Ground Real Estate from Jilin Ground Equity

On 17 April 2015, Ground Real Estate entered into an equity transfer agreement with Jilin Ground Equity whereby Jilin Ground Equity agreed to transfer its 40% equity interest in Baishan Ground Real Estate to Ground Real Estate for a consideration of RMB20,000,000 (which is equivalent to approximately HK$24,000,000) in cash. Upon completion of the transfer, Baishan Ground Real Estate became wholly-owned by Ground Real Estate.

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(h) Acquisition of equity interest in Jilin Zhujia by Ground Real Estate from Jilin Guangze Tourism Investment

On 15 April 2015, Ground Real Estate entered into an equity transfer agreement with Jilin Ground Equity whereby Jilin Ground Equity agreed to transfer its 40% equity interest in Jilin Zhujia to Ground Real Estate for a consideration of RMB4,000,000 (which is equivalent to approximately HK$4,800,000) in cash. Upon completion of the transfer, Jilin Zhujia became wholly-owned by Ground Real Estate. On 8 May 2015, Ground Real Estate entered into an equity transfer agreement with Jilin Guangze Tourism Investment whereby Ground Real Estate agreed to transfer its entire equity interest in Jilin Zhujia to Jilin Guangze Tourism Investment for a consideration of RMB10,000,000 (which is equivalent to approximately HK$12,000,000). Upon completion of the transfer, Jilin Zhujia ceased to be a subsidiary of Ground Real Estate. On 4 June 2015, Ground Real Estate entered into an equity transfer agreement with Jilin Guangze Tourism Investment whereby Ground Real Estate agreed to re-acquire the entire equity interest in Jilin Zhujia from Jilin Guangze Tourism Investment for a consideration of RMB10,000,000 (which is equivalent to approximately HK$12,000,000). Upon completion of the transfer, Jilin Zhujia became wholly-owned by Ground Real Estate.

(i) Acquisition of equity interest in Jilin Ground Real Estate by Ground Real Estate from Mr. Ren, Shanxi Tian Jian Automobile and Zhi Wen Investment

On 15 April 2015, Ground Real Estate entered into an equity transfer agreement with Mr. Ren, Shanxi Tian Jian Automobile and Zhi Wen Investment whereby Mr. Ren, Shanxi Tian Jian Automobile and Zhi Wen Investment agreed to transfer their respective 1%, 7% and 10% of the equity interest in Jilin Ground Real Estate to Ground Real Estate for a consideration of RMB1,000,000 (which is equivalent to approximately HK$1,200,000), RMB7,000,000 (which is equivalent to approximately HK$8,400,000) and RMB10,000,000 (which is equivalent to approximately HK$12,000,000) respectively in cash. Upon completion of the transfer, Jilin Ground Real Estate became wholly-owned by Ground Real Estate.

(j) Acquisition of equity interest in Baishan Ground Business Management by Jilin Ground Property Investment from Jilin Modern Construction

On 25 December 2014, Jilin Ground Property Investment entered into an equity transfer agreement with Jilin Modern Construction whereby Jilin Modern Construction agreed to transfer its 100% equity interest in Baishan Ground Business Management to Jilin Ground Property Investment for a consideration of RMB500,000 (which is equivalent to approximately HK$600,000) in cash. Upon completion of the transfer, Baishan Ground Business Management became a wholly-owned by Jilin Ground Property Investment.

(k) Acquisition of equity interest in Ground Real Estate by Jilin Rongli from Jilin Dongxiu and Changchun Dongxiu

On 14 May 2015, Jilin Rongli entered into equity transfer agreements with Jilin Dongxiu and Changchun Dongxiu respectively whereby Jilin Dongxiu Investment and Changchun Dongxiu Investment agreed to transfer their respective 7.5% and 7.5% equity

– 170 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP interest in Ground Real Estate to Jilin Rongli for a consideration of RMB30,000,000 (which is equivalent to approximately HK$36,000,000) and RMB30,000,000 (which is equivalent to approximately HK$36,000,000) respectively in cash. Upon completion of the transfer, Ground Real Estate became owned as to 15% by Jilin Rongli.

(l) Acquisition of equity interest in Ground Real Estate by Jilin Rongyu Investment from Ground Investment Holding

On 14 May 2015, Jilin Rongyu entered into an equity transfer agreement with Ground Investment Holding whereby Ground Investment Holding agreed to transfer its 85% equity interest in Ground Real Estate to Jilin Rongyu for a consideration of RMB340,000,000 (which is equivalent to approximately HK$408,000,000) in cash. Upon completion of the transfer, Ground Real Estate became owned as to 85% by Jilin Rongyu.

CORPORATE STRUCTURE OF THE TARGET GROUP AFTER THE COMPLETION OF STEPS (A) TO (F) OF THE REORGANISATION

Ms. Cui

100%

Vendor

100%

Ka Yun

100%

Xin Rui

100%

Jilin Xinrui

100% 100%

Jilin Rongli Jilin Rongyu

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CORPORATE STRUCTURE OF THE TARGET GROUP AFTER THE COMPLETION OF STEPS (G) TO (J) OF THE REORGANISATION

Ms. Cui (Note 1) 100%

Charm Success Public Shareholders

65% 35%

The Company

Ms. Cui

Jilin Dongxiu Changchun Dongxiu (Note 2) (Note 2) 41.67% 13.89%

Ground Investment Holding (Note 2)

7.5% (Note 3)85% (Note 3)7.5% (Note 3)

Ground Real Estate

100% 100% 100% 100% 100% 100% 100% 65% 35% Ba J i i J shan Gro

l Jilin Ground Tourism Investment i i Changch l n Gro i n Gro Yan J In J i i l 100% l i u v i n Kegao n u estment ji nd Real u nd Property H Z u nd Real h n

ui Fusong Changbaishan uji Z ze h a uji E 100% state E a state Fusong Ground

100% 100% 100% 100%100% 100% B J i u Hotel Management l Property i F F s n Gro Ba Ba i u u ness Management J Conference song G song G i i i l shan Gro shan Gro S i S n Gro pec er u nd Property vi i S alty ces u u er u osong osong nd vi u u ces nd nd

Note:

(1) On 24 April 2015, Ms. Chai transferred her entire shareholdering in Charm Success to Ms. Cui.

(2) Each of Jilin Dongxiu, Changchun Dongxiu and Ground Investment Holding holds the equity interest of Ground Real Estate as a nominee of Ms. Cui pursuant to the Confirmatory Deed.

(3) The registered capital of Ground Real Estate was increased from RMB200,000,000 to RMB400,000,000 and contributed by Ground Investment Holding on behalf of Ms.Cui on 13 May 2015.

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CORPORATE STRUCTURE OF THE TARGET GROUP AFTER THE COMPLETION OF STEP (K) AND (L) OF THE REORGANISATION

Ms. Cui

100%

Charm Success Public Shareholders Ms. Cui 65% 35% 100% Vendor The Company

100%

Ka Yun

100% Xin Rui

100%

Jilin Xinrui

100% 100%

Jilin Rongli Jilin Rongyu 15% 85%

Ground Real Estate

100% 100% 100% 100% 100% 100% 100% 65% 35% Ba J i i J shan Gro

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Acquisition of the entire equity interest of Ka Yun

On 26 May 2015, the Purchaser entered into the Initial Agreement (as supplemented by the Supplemental Agreement dated 3 July 2015 and the Second Supplemental Agreement dated 22 December 2015) with the Vendor whereby the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell, the Sale Shares, which represents 100% of the equity interest of the Ka Yun. The consideration for the Acquisition is HK$4,650,000,000, which shall be satisfied (i) as to HK$3,858,450,000 by allotment and issue of Convertible Preference Shares, (ii) as to HK$291,550,000 by allotment and issue of Consideration Shares, and (iii) as to HK$500,000,000 by issue of Convertible Bonds by the Company.

Completion of the Acquisition

Completion is expected to take place on the second Business Day after all the conditions as respectively set out in the paragraphs headed “Conditions precedent under the Sale and Purchase Agreement” in the Letter from the Board have either been fulfilled or waived, as the case may be, unless the parties otherwise agree, and the conditions which require simultaneous completion shall be deemed satisfied if all other conditions have been satisfied.

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CORPORATE STRUCTURE IMMEDIATELY AFTER THE COMPLETION OF THE ACQUISITION

Ms. Cui

100% 100%

Vendor Charm Success Public Shareholders

28.5%46.5% 25%

The Company

100%

Ka Yun

100% Xin Rui

100%

Jilin Xinrui

100% 100%

Jilin Rongli Jilin Rongyu 15% 85%

Ground Real Estate

100% 100% 100% 100% 100% 100% 100% 65% 35% Ba J i i J shan Gro

l Jilin Ground Tourism Investment i i Changch l n Gro i n Gro J J Yan In i i l l 100% i i u v n n Kegao u estment nd Real ji u Z nd Property H u nd Real h n

uji Fusong Changbaishan ui Z ze a h uji E 100% state E a state Fusong Ground

100% 100% 100% 100%100% 100% B J i u Hotel Management l Property i F F s n Gro Ba Ba i u u ness Management J Conference song G song G i i i l shan Gro shan Gro S i n Gro S pec u er nd Property vi i S alty u u ce er u osong osong nd vi u u ces nd nd

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COMPLIANCE WITH THE RELEVANT PRC LAWS AND REGULATIONS

As advised by the PRC legal advisers to the Company, the establishment and each change in the equity interests of the Target Group have obtained necessary approval and registration (if required) and have complied with the relevant PRC laws and regulations.

M&A Rules

On 8 August 2006, the Provisions on the Mergers and Acquisitions of Domestic Enterprises by Foreign Investors《關於外國投資者併購境內企業的規定》 ( ) (the “M&A Rules”) was jointly promulgated by six ministries and commissions, including MOFCOM, CSRC and SAFE, implemented on 8 September 2006 and amended on 22 June 2009 by MOFCOM.

According to Article 2 of the M&A Rules, “merger and acquisition of domestic enterprises by foreign investors” referred to in the M&A Rules shall mean that a foreign investor purchases the equity interest of a shareholder in a domestic non-foreign-invested enterprise (“domestic company”) or subscribes for increased capital of a domestic company so as to convert such domestic company into a foreign-invested enterprise (“merger and acquisition of equity interest”); or, a foreign investor establishes a foreign-invested enterprise, through which it purchases and operates the assets of a domestic enterprise by agreement, or, a foreign investor purchases the assets of a domestic enterprise by agreement and then invests such assets to establish a foreign-invested enterprise and operates the assets (“merger and acquisition of assets”). According to Article 11 of the M&A Rules, the merger and acquisition of a domestic company with a related party relationship by a domestic company, enterprise or individual in the name of an overseas company legitimately incorporated or controlled by the domestic company, enterprise or individual shall be subject to examination and approval by MOFCOM. The parties involved shall not use domestic investment by foreign invested enterprises or other methods to circumvent the aforesaid requirements.

As advised by the PRC legal advisers to the Company, since Ms. Cui has obtained the nationality of Antigua and Barbuda, she does not fall under the definition of “domestic person” of the M&A Rules. Accordingly, Article 11 of the M&A Rules does not apply to the Acquisition and no approval or consent from the MOFCOM or any other PRC government authority is required in relation to the Acquisition and the reorganisation of the Target Group in preparation of the Acquisition.

SAFE Registration

On 21 October 2005, the SAFE promulgated the Notice on Relevant Issues Relating to the Administration of Foreign Exchange of Financing and Return Investment Activities by Domestic Residents Conducted via Offshore Special Purpose Vehicles《關於境內居民 ( 通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知》) (the “Circular 75”), according to which, a PRC resident who establishes or takes control of a special purpose company abroad is required to effect foreign exchange registration with local foreign exchange bureau. While injecting assets or equity interests that a domestic resident owns in a domestic enterprise into a special purpose company abroad (the “SPV”), or carrying

– 176 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. HISTORY AND REORGANISATION OF THE TARGET GROUP out offshore equity financing after injecting such assets or equities into such SPV, a domestic resident shall amend the registration of offshore investment related foreign exchange to reflect the net assets or equity interests that he/she holds in the SPV. On 14 July 2014, Circular 75 has been repealed by the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Overseas Investment and Financing and Inbound Investment via Special Purpose Vehicles《關於境內居民通過 ( 特殊目的公司境外投融資及返程投資外匯管理有關問題的通知》) (the “Circular 37”). Pursuant to the Circular 37, which was promulgated by the SAFE and became effective on 14 July 2014, a PRC citizen residing in the PRC(a“PRC Resident”) must register with the local branch of SAFE before he contributes assets or equity interests in an overseas special purpose vehicle, which is directly established or controlled by the PRC Resident for the purpose of overseas investment or financing. As advised by the PRC legal advisers to the Company, Ms. Cui, being the beneficial owner of the Target Group has completed the registration with the relevant local SAFE authority and thus has complied with the requirements under Circular 37.

The PRC legal advisers to the Company and the PRC legal advisers to the Joint Sponsors have advised that consent of the CSRC pursuant to the requirements under the Notice of the State Council Regarding the Further Strengthening of the Administration of the Share Issuance and Listing of Joint Stock Company outside the Mainland《國務院關於 ( 進一步加強在境外發行股票和上市管理的通知》) (Guo Fa [1997] No.21) (the “Red Chip Guidelines”) is not required in relation to the Acquisition. According to the PRC legal advisers to the Company and the PRC legal advisers to the Joint Sponsors, given that Ms. Cui has obtained the nationality of Antigua and Barbuda, the Red Chip Guidelines does not apply to the Acquisition and the proposed deemed new [REDACTED]ofthe Company. Accordingly, no approval or consent from the CSRC is required and no consultation with the CSRC was conducted.

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OVERVIEW

The Target Group is a property developer in Jilin Province of the PRC principally engaged in the development, sale and leasing of residential, commercial and tourism properties and property management. In March 2015, Ground Real Estate, the intermediate holding company within the Target Group, was recognised as one of the 200 top property development enterprises in China (2015中國房地產開發企業200強) and in March 2015, it was announced that it ranked 116th in the “China’s Property Developers with the Most Comprehensive Strength 2015” (2015中國房地產綜合實力排名).

The Target Group was established by Ms. Chai, an executive Director and the chairperson of the Board, and is beneficially held by Ms. Cui, the daughter of Ms. Chai and a controlling Shareholder of the Company. In 2010, the Target Group began developing its first residential property project, namely Guangze•Amethyst City (廣澤‧紫晶城), in Jilin City of Jilin Province. As at the Latest Practicable Date, the property portfolio of the Target Group comprised seven property projects, all of which are situated in Jilin Province:

• Residential projects: Guangze•Amethyst City (廣澤‧紫晶城), Guangze• Tudors Palace (廣澤‧瀾香), Guangze China House (廣澤蘭亭), Guangze Red House (廣澤紅府) and Guangze International Shopping Centre – Residence (廣澤國際購物中心－住宅)

• Commercial property project: Guangze International Shopping Centre (廣澤國際購物中心)

• Tourism property project: Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村)

The details of these property projects of the Target Group are set out in the paragraph headed “Description of Property Projects” in this section.

In respect of its property development, the Target Group focuses on site selection, land acquisition, project planning and positioning, sales and marketing and property management. The Target Group outsources its design and construction to qualified contractors and agencies, supervises their performance and manages the overall project development process.

For the three years ended 31 December 2014 and the eight months ended 31 August 2014, and 31 August 2015, the Target Group recorded total revenue of RMB531.0 million, RMB553.1 million, RMB805.6 million, RMB635.4 million and RMB808.8 million respectively, and net profits of RMB140.7 million, RMB91.0 million, RMB200.3 million, RMB179.1 million and RMB159.9 million respectively. During the Track Record Period, the principal source of revenue of the Target Group was its sales of residential properties. As at 31 October 2015, the Target Group and the Enlarged Group had an attributable total GFA of 1,380,412 sq.m. and 1,875,567 sq.m respectively in its property projects and a corresponding total market value attributable to the Target Group and the Enlarged Group (as valued by Savills according to the respective states of the property projects as at 31 October 2015) of approximately RMB5.7 billion and RMB7.3 billion, respectively.

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COMPETITIVE STRENGTHS

The Directors believe that the principal competitive strengths of the Enlarged Group will include the following:

Dedicated geographical focus and regional competitiveness in Jilin Province of the PRC

Since inception, the business focus of the Target Group has been the property development market in Jilin Province of the PRC. In 2010, the Target Group entered into its first land grant contract with the MLR in Jilin City marking the development of its first residential project, namely Guangze•Amethyst City. Since then, the Target Group has been developing four other residential projects, one integrated leisure and shopping centre and one tourism property project in Jilin Province. In March 2015, Ground Real Estate, the intermediate holding company within the Target Group, was recognized as one of the 200 top property development enterprises in China (2015中國房地產開發企業200強). In March 2015, it was announced that it ranked 116th in the “China’s Property Developers with the Most Comprehensive Strength 2015” (2015中國房地產綜合實力排名).

The Target Group has been able to timely seize the opportunity by expanding its property portfolio to include commercial property project in 2012 while the residential property market in Jilin Province was slowing down due to the introduction of the restrictive regulatory policies by the government to cool down the real estate market, which came into effect nationwide in 2011.

Despite being the first commercial property project of the Target Group, Guangze International Shopping Centre has become a new landmark of Baishan City (白山市) in Jilin Province since its grand opening in January 2015. Guangze International Shopping Centre is designed as an integrated commercial complex that offers leisure and shopping experience to customers and visitors. The Directors believe that the experience in the development of Guangze International Shopping Centre has well-positioned the Target Group in future development of similar commercial property projects that replicates the model of integrating leisure and entertainment activities and shopping experience.

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To leverage the development opportunity of tourism properties in the vicinity of the well-known Changbaishan (長白山) in Jilin Province, which is a level-5 national travel destination (國家5A級旅遊景區) recognized by China National Tourism Administration of the PRC (中華人民共和國國家旅遊局) to capture the growth potential in the tourism industry in Jilin Province, the Target Group is developing its first tourism property, namely Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村), in Changbaishan. The construction of this tourism property project of the Target Group is expected to commence in March 2016. As currently planned, the overall design and planning of this tourism property project will comprise a broad range of tourist attractions such as hot spring facilities, ethnic and cultural travelling avenues, hotel(s) and other tourist and complementary facilities. The development of the entire project is expected to span over a period of five years.

The Directors believe that the experience and knowledge gained and acquired in the property development market in Jilin Province has enabled the Target Group to be sensitive to the trends and development in different sectors of the property market which in turn will enhance the market awareness and the capability of the Enlarged Group to capture suitable property development opportunities in Jilin Province of the PRC.

Demonstrated track record in building a balanced property portfolio and diversified product offering and income sources

The Target Group is focused on building a balanced property portfolio with a view to minimizing the risks associated with reliance on any one particular type of property product and enabling itself to respond to market and property price fluctuations. The residential and commercial components in the property portfolio of the Target Group both contribute to the growth of the Target Group with its respective unique product features. During the Track Record Period, the principal source of income of the Target Group was from the sales of residential properties. The proceeds from sales of residential properties replenish the cash flow and thus the capital of the Target Group. With the opening of Guangze International Shopping Centre in January 2015 and the planned completion of Changbaishan Ground Pine Township International Resort in 2020 among others, the Directors believe that, going forward, the revenue contribution from non-residential projects is expected to increase gradually. The unsold portions in these commercial and tourism property projects are and will be held by the Target Group for investment purpose and the rental and operational income therefrom not only contribute to the cash flow of the Target Group, but the potential increment of value of these properties will also strengthen the aggregate asset value of the Enlarged Group.

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The Target Group aims to provide the market with a variety of property products to suit the different needs of different types of customers. As at the Latest Practicable Date, the Target Group was offering to the market different types of property products such as multi-storey apartments, low-rise townhouses, car parking spaces and ancillary community premises in its various residential projects, namely Guangze•Amethyst City (廣澤‧紫晶城), Guangze•Tudors Palace (廣澤‧瀾香), Guangze China House (廣澤蘭亭), and Guangze Red House (廣澤紅府) as well as retail shops and other leasable areas in Guangze International Shopping Centre and ancillary commercial premises in its developed residential projects. In respect of Guangze International Shopping Centre, prospective tenants can choose to lease shops and other leasable areas with a GFA ranging from less than 10 sq.m to more than 1,000 sq.m. Going forward, with the expected completion of Phase I of Guangze Red House (廣澤紅府) and Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村) in 2016 and 2020, respectively, the property product offering of the Target Group is expected to be expanded to include property right hotel(s), hot spring hotels, apartments and ancillary commercial premises within the project, thus further diversifying the income sources of the Target Group.

Ability to identify and acquire land at suitable locations for property projects development

The management of the Target Group well recognizes that location is one of the most significant determining factors in property development. The Target Group has been strategic in its site selection with a view to focusing on acquiring land in locations which the management of the Target Group believes to be suitable for the development of its property projects. During the Track Record Period, the Target Group was able to successfully acquire various parcels of land in locations which the management of the Target Group believes to be suitable in Jilin City (吉林市), Baishan City (白山市), Yanji City (延吉市) and Fusong County (撫松縣) for its various property development. For example, the various residential projects of the Target Group situate in locations with favourable surrounding environment that help create a favourable living condition. Guangze International Shopping Centre, on the other hand, is located in the city centre of Baishan and Changbaishan Ground Pine Township International Resort is being developed at Changbaishan which is famous for its natural scenery.

As part of its site identification and selection process, the Target Group takes into account numerous factors before taking part in the competitive bidding, public auction and the listing-for-sale process coordinated by the local government. Some of the significant factors taken into account by the Target Group include the location and size of the subject pieces of land, the surrounding environment and infrastructure costs of development, overall government land zoning and development plans and policies, transportation network, population growth potential in the locality, and so forth.

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Commitment to develop quality property projects and provide professional property management services

The Target Group is committed to developing quality property projects. The first residential project of the Target Group, namely Guangze•Amethyst City (廣澤 ‧紫晶城), is an acclaimed residential property in Jilin Province and was awarded with four awards. These include “Driven Property” (推動力樓盤) and “Top 10 Residential Value Property” (十大居住價值樓盤) awarded by China Real Estate Business and “Green Residential-Friendly Property” (綠色宜居樓盤) and “Top Selling Property of the Year” (年度熱銷樓盤) awarded by “China Real Estate Annual Overall Rating – Jilin” in recognition of its high quality among properties developed concurrently. The success in the development of Guangze•Amethyst City was attributed principally to the overall project design which aimed at creating a living environment where the daily needs of the residents can be easily met. The Target Group has adopted a similar approach in developing its subsequent property projects. Guangze International Shopping Centre is another demonstration of the Target Group’s commitment in developing quality property projects.

The Target Group believes that the value of a property can be enhanced by suitable property management services and this is the underlying reason for the commitment of the Target Group to expand into the property management business. In 2010, the Target Group established a subsidiary in Jilin Province qualified to provide professional property management services, namely Jilin Ground Property Services. Jilin Ground Property Services is accredited with G8/T/9001-2008/ISO9001: 2008 (quality management system standard) for its property management services in respect of the residential area and the anxillary commercial premises.

The property management services provided to Guangze International Shopping Centre is of no exception. On 25 December 2014, Jilin Ground Property Investment, a member of the Target Group, entered into an equity transfer agreement whereby it agreed to acquire the entire equity interest in Baishan Ground Business Management from Jilin Modern Construction, which was indirectly wholly-owned by Ms. Chai. With a dedicated team of over 50 employees, the sole business of Baishan Ground Business Management is to provide professional property operation and management services to Guangze International Shopping Centre and its tenants and owners with an aim to optimise the value of the property which in turn is expected to help attract quality new tenants and retain existing tenants.

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The Directors believe that the proven track record of the Target Group in offering quality residential and commercial properties has given it a competitive edge in the property development market in the PRC.

For Changbaishan Ground Pine Township International Resort, the relevant project company of the Target Group has entered into two agreements with an Independent Third Party property consulting company, in July 2014 pursuant to which such property consulting company is engaged to provide professional hotel management services to the owners of the individual units in the serviced apartment. The Directors believe that engaging third party professional company in the operation and management of different components of the tourism property project will favourably benefit the growth of the Target Group.

Experienced and skilled management team under the leadership of the chairperson of the Board, Ms. Chai

The core management team of the Target Group has in-depth industry knowledge of the property development industry in the PRC as well as extensive business management skills. Most of them have experience in working in other renowned property developers in the PRC before joining the Target Group. Ms. Chai, an executive Director and the chairperson of the Board, has over 15 years of working experience in the property development business in Jilin Province. Since the establishment of the first subsidiary of the Target Group in 2009, Ms. Chai has been the key figure leading the property development and management business of the Target Group. Ms. Chai is supported by an experienced management team such as Mr. Wang Guanghui, an executive Director of the Company, who joined the Target Group in May 2014 bringing with him over 23 years of experience in the real estate industry in the PRC. The members of the senior management team of the Target Group came aboard with property development and management, design management, marketing, customer relations and human resources management, administration and business development experience. Please refer to the section headed “Directors and Senior Management of the Enlarged Group” in this circular for further details.

The Directors believe that the collective knowledge and experience of the core management team of the Target Group will continue to contribute to the business sustainability and ongoing success of the Target Group in the property development industry in the PRC.

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BUSINESS STRATEGIES

The Enlarged Group intends to continue expanding its property portfolio and seeking sustainable growth by pursuing the following principal business strategies:

Strategically pace its property development in Jilin Province of the PRC and acquire land reserves at suitable locations and expand into new target markets to sustain future growth

With its proven track record in the property development business in Jilin Province and in-depth market knowledge it has acquired, the Target Group will continue its property development business in Jilin Province going forward and continue to capitalise on the market advantages and investment opportunities this province offers. The Directors believe that the Target Group is one of the few dedicated property developers found in Jilin Province and has a competitive edge over other players in the market because of its commitment and contribution to the property market development in Jilin Province. The Enlarged Group will continue to capitalize on such competitive edge in Jilin Province.

The Enlarged Group will continue to optimise its resources in further increasing its market share in the property market in Jilin Province as well as entering into the property development market in other parts of PRC by identifying and acquiring suitable parcels of land for the purpose of developing quality residential, commercial property projects. As at the Latest Practicable Date, the Target Group is exploring the opportunities to acquire the surrounding remaining land parcels for the development of the Guangze Red House and Changbaishan Ground Pine Township International Resort. The principal reason for acquiring these land parcels was their respective suitable locations well supported by transportation network and urban infrastructure. According to the conditions set forth in the related land grant contracts and the initial project development proposals of the Target Group, the Target Group plans to develop quality residential properties in these locations. The Directors believe that acquiring land at suitable locations will enable the Enlarged Group to achieve sustainable growth in the property development business.

Continue to adopt a diversified property development strategy and maintain a balanced property portfolio

During the Track Record Period, the Target Group has successfully developed various residential projects and Guangze International Shopping Centre, being an integrated leisure and shopping complex. In addition, the Target Group has also begun its development of the first tourism property project, namely Changbaishan Ground Pine Township International Resort. These three distinct types of property together have resulted in a balanced property portfolio of the Target Group. The Directors believe that adopting a diversified property development strategy and maintaining a balanced property portfolio are crucial to the business sustainability of the Enlarged Group because they enable the Enlarged Group to be less susceptible to swift change in investors’ appetite or price fluctuation in one type of property or another.

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The Target Group will remain committed to offering to the market a variety of property products. During the Track Record Period, the Target Group has among its developed property projects offered to its prospective customers and property investors different purchase options ranging from residential apartments, low-rise townhouses to retail shops and spaces in multi-storey Guangze International Shopping Centre. Alongside the development of Changbaishan Ground Pine Township International Resort, prospective customers of the Target Group will be offered with different types of investment opportunities such as ownership in property rights hotels. In addition, the Target Group also plans to develop more tourism properties in popular tourist destinations in the PRC such as Sanya of Hainan Province.

The Directors believe that despite residential properties will remain a core property product of the Target Group and thus the Enlarged Group, the Enlarged Group will remain receptive to new business ideas and be innovative in product development with a view to expanding its property portfolio and product offering, which in turn will lead to expansion of clientele and income sources. For example, the Enlarged Group intends to explore the opportunity in developing property projects in the countryside and areas close to nature reserves or conservation areas where residents and visitors can have a closer connection with the nature.

Continue to promote the “Ground Properties” brand to strengthen brand recognition in the property development market

The “Ground Properties” brand is a valuable asset and tool for further expansion and growth of the Enlarged Group. Leveraging the success of the Target Group during the Track Record Period, the Enlarged Group will be committed to actively promoting its corporate brand with a view to positioning the Enlarged Group as a representation of quality property projects in the residential, commercial and tourism property sectors in China. The Enlarged Group intends to achieve this in stages by continuing to devote its resources to promoting the property projects in the related marketing campaigns. The Directors believe that upon Completion, the synergy between the Company being an offshore listed platform and the addition of the property development business of the Target Group into the Group will help strengthen the corporate image of the Enlarged Group. The overall goal of the Company is to strengthen the recognition of “Ground Properties” among existing and prospective customers, business partners as well as other market players.

In particular, the Enlarged Group aims to further promote and strengthen its corporate image by developing future tourism property projects around the theme of cultural travel (文化旅遊). The ultimate goal is to create recognition in the market that the Enlarged Group is a dedicated property developer in this particular type of property in the PRC.

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Retain and attract talented personnel by offering competitive remuneration packages and comprehensive training programmes

The Directors believe that the sustainability of the business of the Enlarged Group is dependent on not only the leadership of the senior management team but also the contribution of the entire workforce. Therefore, the Enlarged Group intends to maintain a robust reward and training system to retain existing personnel and attract new ones, particularly experienced individuals, when opportunity for expansion arises.

The Target Group will continue to develop and offer comprehensive training programmes to different levels of staff with a view to improving their knowledge of the property development market in Jilin Province and the PRC on the whole, and ensuring their understanding of the latest business strategies and various management and operational systems of the Target Group. The Directors believe that by offering well-designed and practical training programmes will help foster a higher level of recognition of the corporate value and culture among the employees which will in turn help retain existing personnel and attract new talent to the Enlarged Group.

The Enlarged Group plans to optimise its financial resources by offering competitive remuneration packages to retain and attract suitable personnel. If approved by the Board, the Enlarged Group intends to offer performance incentives to eligible employees, including performance-based bonuses and share options under the existing share option scheme of the Company, to better align the interests of the employees with the those of the Enlarged Group and to deepen the sense of loyalty of the employees which in turn will help maintain a stable workforce. In addition to offering competitive remuneration packages to its employees, the Enlarged Group also aims to continue to nurture and strengthen the core corporate culture within the organisation which emphasizes on responsibility, integration and passion in work. The Directors believe that this will in turn benefit the Enlarged Group as well as its different stakeholders and contribute to the further growth of the Enlarged Group.

PROPERTY PROJECTS OF THE TARGET GROUP

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As at 31 October 2015, the Target Group had completed property projects or project phases with an aggregated GFA of approximately 183,283 sq.m, projects or project phases with an aggregate GFA of approximately 449,221 sq.m that were under development and an aggregate GFA of approximately 1,150,627 sq.m that were held for future development.

Geographic Distribution of the Property Projects

The following diagram shows the geographic distribution of the property projects of the Target Group as at the Latest Practicable Date.

Guangze • Amethyst City Guangze • Tudors Palace Changchun Jilin

Yanji Jilin Province Guangze Red House

Fusong Changbaishan Ground Pine Township International Resort Baishan

Guangze China House

Guangze International Shopping Centre Railway Road

Classifications of the Property Projects

Each of the property projects or project phases may require multiple land use rights certificates, construction permits, pre-sale permits and other permits and certificates, which may be issued at different times throughout the development process. Based on the operation of our business, the Target Group generally classifies the property projects into the following four categories.

The classification of the property projects is also different from the classification of the property projects in the section “Property Valuation of the Target Group” in Appendix VIB and the section “Accountants’ Report on the Target Group” in Appendix IIIA. The table below sets forth the classification of property projects and the corresponding classification of property projects in the section “Property Valuation of the Target Group” in Appendix VIB and the section “Accountants’ Report on the Target Group” in Appendix IIIA to this circular.

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Our Classification Valuation Report Accountants’ Report

I. Completed property projects for sale Group III – Properties Completed properties held by the Enlarged held for sale A property is treated as completed and held Group for sale in the for sale when the completion certificate is PRC received from the relevant local government authorities in respect of the property or construction of all buildings in respect of which has been completed

II. Projects under development Group II – Property Investment properties held by the Enlarged A property or land parcel is treated as under Group for investment construction as soon as the construction work in the PRC commencement permit is received from the relevant local government authority in respect Group III – Properties Properties under of the property or land parcel but prior to the held by the Enlarged development and issuance of the completion certificate Group for sale in the completed properties PRC held for sale

Group IV – Properties held by the Enlarged Group under development in the PRC

III. Projects held for future Development Group V – Properties Properties under held by the Enlarged development A property is treated as held for future Group for future development if the land use rights development in the certificate(s) is received from the relevant local PRC government authorities in respect of the property, but in each case, construction work has not yet commenced

IV. Projects to be acquired Group VI – Property to Properties under be acquired by the development/ MOU, auction confirmation letter or any of the Enlarged Group in the Not applicable agreement for the acquisition of land has been PRC signed, but land use rights certificates have not been obtained for the underlying parcel of land

Some of the projects are divided into multiple-phase developments that are completed on a rolling basis, hence a project may fall into one or more of the above categories.

The project names used in this circular are the names used or intended to be used by the Target Group to market its properties. The English names of the project are translations of their Chinese names and are for identification purposes only. Some of the names of property projects may require the approval of relevant authorities and the relevant authorities may not have accepted or may not accept the names the Target Group has used or intends to use as the registered names of the properties. As a result, the actual names registered with the relevant authorities may be different from the names we have used or intend to use and the names the Target Group uses or intends to use are subject to change.

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The following table shows the details of the property projects of the Target Group as at 31 October 2015*.

(I) Use, GFA and development status

FUTURE DEVELOP- MENT/ UIESO H AGTGROUP TARGET THE OF BUSINESS TO BE ACQUIR- COMPLETED UNDER DEVELOPMENT ED Total Actual/ Actual/ Actual/ Reference Saleable leasable estimated estimated estimated to GFA GFA held GFA construction pre-sale con- Property GFA Non- remain for under Sale- Saleable commence- commence- struction Remaining Target Valua- Use/ Site complet Saleable saleable -ing un- invest- developable GFA pre- Planned ment ment comple- term of land Group’s tion Project Planned Use area(1) -ed(2) GFA(3) GFA sold(4) ment(5) ment(2) GFA(3) sold GFA(2) date(6) date(7) tion date(8) use rights(9) interest Report (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (year) (%)

Guangze• Residential

8 – 189 – Amethyst City (廣澤‧紫晶城) Phase I .... 112,570 228,685 194,741 33,944 2,869 –––––AugustNovember April 2013 Residential: 100 App 2010 2010 65 VIB-4 Commercial: 35 Phase II and 224,939 525,439 353,914 171,525 19,148 –––––May2012 September November Residential: 100 App Relocating 2012 2015 67 VIB-5 District . . . Commercial: 37

Guangze• Residential 92,591 − − − − – 107,469 93,610 37,890 – January February March 2016 Residential: 100 App Tudors Palace 2013 2014 67 VIB-7 (廣澤‧瀾香)

Guangze China Residential House (廣澤蘭亭) Phase I .... 41,429 − − − − – 128,736 42,224 2,883 – December January December Residential: 100 App 2014 2015 2017 69 VIB-6 Commercial: 39 Phase II .... 32,516 ––––––––84,333 – – – – – App VIB-11 FUTURE THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS DEVELOP- MENT/ TO BE ACQUIR- COMPLETED UNDER DEVELOPMENT ED Total Actual/ Actual/ Actual/ Reference Saleable leasable estimated estimated estimated to GFA GFA held GFA construction pre-sale con- Property GFA Non- remain for under Sale- Saleable commence- commence- struction Remaining Target Valua- Use/ Site complet Saleable saleable -ing un- invest- developable GFA pre- Planned ment ment comple- term of land Group’s tion Project Planned Use area(1) -ed(2) GFA(3) GFA sold(4) ment(5) ment(2) GFA(3) sold GFA(2) date(6) date(7) tion date(8) use rights(9) interest Report (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (sq.m.) (year) (%) UIESO H AGTGROUP TARGET THE OF BUSINESS

Guangze Integrated 29,934 168,180 95,206 72,974 20,003 68,433 102,816 – – – November October December Residential: 100 App International commercial 2012 2013 2015 68 VIB-2 Shopping complex Commercial: App Centre (Residential 38 VIB-3 (廣澤國際購物 and 中心) commercial)

Guangze Red Residential House (廣澤紅府) Phase I .... 32,987 − − − − – 82,315 56,685 23,038 – November May 2015 October Residential: 100 App 2014 2016 69 VIB-8

9 – 190 – Commercial: 36 Phase II . . . 51,855 − − − − – 130,700 46,794 nil – September November April 2018 Residential: 100 App 2015 2015 70 VIB-9 Commercial: 40

Changbaishan Integrated 668,923 – − − − – − – – 1,150,627 March 2016 May 2016 December Residential: 65 App Ground Pine tourism 2020 67 VIB-10 Township resort Commercial: International 37 Resort (長白山 Industrial & 廣澤果松小鎮 other: 國際度假村) 47

* The figures in this table have been rounded to the nearest whole number.

** The development plan of Changbaishan Ground Pine Township International Resort is yet to be finalised. The maximum permissible GFA is 1,150,627 sq.m. Notes: THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS

(1) “Site area” is based on relevant land use rights certificates, land grant contracts, tender documents, or other relevant agreements (as the case may be).

(2) “GFA completed” of completed projects is based on completion certificates. “GFA under development” of projects under development is based on the valuation report as set out in Appendix VIB to the circular. “Planned GFA” of projects for future development or project(s) to be acquired is based on the valuation report as set out in Appendix VIB to the circular.

(3) “Saleable GFA” is based on pre-sale permits. UIESO H AGTGROUP TARGET THE OF BUSINESS

(4) “Saleable GFA remaining unsold” refers to saleable GFA minus GFA sold (as provided by the Target Group).

(5) “Total leasable GFA held for investment” refers to the GFA held by the Target Group for leasing.

(6) “Actual/estimated construction commencement date” of (a) completed projects or projects under development refers to the date of the first construction works permit and that of (b) projects for future development refers to the date the construction is estimated to commence with reference to the internal construction working plans of the Target Group. 9 – 191 –

(7) “Actual/estimated pre-sale commencement date” refers to the date the Target Group obtained or estimates to obtain the first pre-sale permit for that project or the relevant phase of a multi-phase project with reference to the internal construction working plans of the Target Group.

(8) “Actual/estimated construction completion date” of (a) completed projects refers to the date of the last completion certificate for the whole phase and that of (b) projects under development is based on the current estimation of the expected date of obtaining the last completion certificate with reference to the internal construction working plans of the Target Group.

(9) “Remaining term of land use rights” is based on the terms set out in the relevant land use rights certificates. The following table shows the details of the property projects as at 30 November 2015. THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS

(II) Development costs and revenue

Estimated further Development costs development costs to Payment schedule of further incurred(1) complete the project(2) development costs (Estimated)(3) (RMB million) (RMB million) (RMB million) Revenue derived from Year Year Year

Construction ending 31 ending 31 ending GROUP TARGET THE OF BUSINESS Land cost Construction Land cost cost to be December December 2017 and Sales of Rental Projects paid cost paid to be paid paid 2015 2016 after Period properties income (RMB’000) (RMB’000)

Guangze•Amethyst City (廣澤‧紫晶城) Phase I ...... 169.9 493.6 − 1.2 1.2 – – Year ended 526,555 – 31 December 2012 Year ended 29,089 − 9 – 192 – 31 December 2013 Year ended 36,047 − 31 December 2014 Eight months ended 31 8,879 – August 2015 Phase II and Relocating 293.7 941.3 – 146.9 13.1 81.0 52.7 Year ended –− District ...... 31 December 2012 Year ended 514,869 − 31 December 2013 Year ended 758,195 − 31 December 2014 Eight months ended 31 220,957 – August 2015

Guangze•Tudors Palace 145.5 294.1 – 200.6 17.9 110.7 72.1 Year ended –− (廣澤‧瀾香) 31 December 2012 Year ended –− 31 December 2013 Year ended –− 31 December 2014 Eight months ended 31 –– August 2015 HSDCMN SI RF OM H NOMTO OTIE EENI NOPEEADI UJC OCAG.THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS Estimated further Development costs development costs to Payment schedule of further incurred(1) complete the project(2) development costs (Estimated)(3) (RMB million) (RMB million) (RMB million) Revenue derived from Year Year Year Construction ending 31 ending 31 ending Land cost Construction Land cost cost to be December December 2017 and Sales of Rental Projects paid cost paid to be paid paid 2015 2016 after Period properties income (RMB’000) (RMB’000) UIESO H AGTGROUP TARGET THE OF BUSINESS Guangze China House (廣澤蘭亭) Phase I ...... 10.3 94.6 56.7 188.3 10.8 72.4 161.9 Year ended –− 31 December 2012 Year ended –− 31 December 2013 Year ended –− 31 December 2014 Eight months ended –– 31 August 2015 9 – 193 – Phase II ...... 6.9 ––––––Yearended –− 31 December 2012 Year ended –− 31 December 2013 Year ended –− 31 December 2014 Eight months ended –– 31 August 2015

Guangze International 181.3 428.3 – 162.1 3.8 47.4 110.9 Year ended –− Shopping Centre 31 December 2012 (廣澤國際購物中心) Year ended –− 31 December 2013 Year ended –− 31 December 2014 Eight months ended 551,241 10,406 31 August 2015 HSDCMN SI RF OM H NOMTO OTIE EENI NOPEEADI UJC OCAG.THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS Estimated further Development costs development costs to Payment schedule of further incurred(1) complete the project(2) development costs (Estimated)(3) (RMB million) (RMB million) (RMB million) Revenue derived from Year Year Year Construction ending 31 ending 31 ending Land cost Construction Land cost cost to be December December 2017 and Sales of Rental Projects paid cost paid to be paid paid 2015 2016 after Period properties income (RMB’000) (RMB’000) UIESO H AGTGROUP TARGET THE OF BUSINESS Guangze Red House (廣澤紅府) Phase I ...... 85.3 71.6 – 163.6 1.7 72.8 89.1 Year ended 31 –− December 2012 Year ended 31 –− December 2013 Year ended 31 –− December 2014 Eight months ended –– 9 – 194 – 31 August 2015 Phase II ...... 133.6 15.8 – 308.9 3.3 137.4 168.3 Year ended 31 –− December 2012 Year ended 31 –− December 2013 Year ended 31 –− December 2014 Eight months ended –– 31 August 2015 HSDCMN SI RF OM H NOMTO OTIE EENI NOPEEADI UJC OCAG.THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS Estimated further Development costs development costs to Payment schedule of further incurred(1) complete the project(2) development costs (Estimated)(3) (RMB million) (RMB million) (RMB million) Revenue derived from Year Year Year Construction ending 31 ending 31 ending Land cost Construction Land cost cost to be December December 2017 and Sales of Rental Projects paid cost paid to be paid paid 2015 2016 after Period properties income (RMB’000) (RMB’000) UIESO H AGTGROUP TARGET THE OF BUSINESS Changbaishan Ground Pine 19.02 31.65 1.31 172.69 4.43 73.79 95.8 Year ended 31 −− Township International December 2012 Resort – Zone A Year ended 31 –– (長白山廣澤果松小鎮國際度 December 2013 假村 –A區) Year ended 31 −− December 2014 Eight months ended 31 –– August 2015 9 – 195 –

Notes:

(1) “Land costs paid” of the “Development costs incurred” refer to direct costs for obtaining the land use rights of relevant projects. “Construction costs paid” referred to the direct costs (other than land costs) for the relevant projects, including without limitation the construction costs and capitalised interest costs according to the internal records of the Target Group.

(2) “Estimated further development costs to complete the project” refer to the budgeted costs estimated to be incurred by the Target Group and are based solely on the internal record, project plans and estimates of the Target Group, and are subject to change.

(3) “Payment schedule of further development costs” are based solely on the internal record, project plans and estimates of the Target Group, and are subject to change. THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. BUSINESS OF THE TARGET GROUP

(III) Valuation

The following information is extracted from Savills’s property valuation report set out in Appendix VIB to this circular, summarising Savills’s valuation of each of the property projects of the Target Group and the selected key assumptions used by Savills in its valuation. Please refer to the section headed “Property Valuation of the Target Group” set out in Appendix VIB to this circular for further details, including the background to these assumptions.

Reference to Market value valuation in existing state report as set attributable to out in the Target Appendix VIB Group as at 31 Valuation approach (No. of Projects October 2015 and key assumptions property)

RMB369,000,000 Direct comparison approach: 2 (for sale) unit rates of RMB4,800/sq.m. for residential, RMB20,000/sq.m. for commercial; RMB170,000/bay for car park

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Phase II of Guangze China House Nil Nil 10 (廣澤蘭亭二期) (Note 1)

Guangze•Tudors Palace RMB1,143,000,000 Direct comparison approach: 6 (廣澤•瀾香) unit rates of RMB16,400/sq.m. for residential, RMB14,200/sq.m. for commercial

Guangze Red House Phase I RMB296,000,000 Direct comparison approach: 7 (廣澤紅府一期) unit rates of RMB6,000/sq.m. for residential, RMB20,100/sq.m. for commercial; RMB150,000/bay for car park

Guangze Red House Phase II RMB209,000,000 Direct comparison approach: 8 (廣澤紅府二期) unit rates of RMB5,300/sq.m. for residential, RMB15,800/sq.m. for commercial; RMB120,000/bay for car park

Changbaishan Ground RMB2,151,500,000 Direct comparison approach: 9 Pine Township International Resort (65% interest accommodation values of (長白山廣澤果松小鎮國際度假村) attributable to RMB2,780/sq.m. for the Target residential land, Group) (Note 2) RMB2,790/sq.m. for commercial land; RMB430/sq.m. for other uses land (Note 3)

Note:

1. In the course of valuation, Savills has assigned no commercial value to Phase II of Guangze China House as the Enlarged Group has not obtained any valid title documents as at 31 October 2015.

2. The remaining 35% interest of the property is vested in the Group.

3. Accommodation value is the value of the sale price analysed on basis of per sq.m. of the permissible gross floor area and is a common way of analysis of land sale transaction.

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DESCRIPTION OF PROPERTY PROJECTS

Property Projects in Jilin City

(I) Guangze•Amethyst City (廣澤‧紫晶城)

Guangze•Amethyst City (廣澤‧紫晶城) was the first property project developed by the Target Group and is a large-scale residential project with community commercial premises. The development of Guangze•Amethyst City commenced in 2010 and it was divided into two phases. The two phases of Guangze•Amethyst City comprise a total of approximately 60 apartment buildings with approximately 6,000 residential units and the size of these residential units generally ranges from approximately 40 sq.m to 200 sq.m. Guangze•Amethyst City situates at the intersection of Jiefangxi Road (解放西路) and Huangqi Road (黃旗路). The project site is close to the Wende River (溫德河) and adjacent to Jilin City No. 1 High School China (吉林市第一中學校).

Phases I and II and Relocating District of Guangze•Amethyst City comprise 10 parcels of land with an aggregate site area of approximately 337,509.0 sq.m. The project involves a comprehensive development of low-rise and high-rise apartment buildings, together with clubhouses, car parks and ancillary commercial premises which primarily cater for the community needs, such as supermarket shops, laundry shops, restaurants and dental clinic and so on. As at 31 October 2015, an aggregate GFA of approximately 24,726.87 sq.m in Guangze•Amethyst City has been sold by the Target Group.

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Phase I

Based on the internal records of the Target Group as at 31 October 2015, details of Phase I of this project are as follows:

Development Status Completed property project for sale

Site area 112,569.8 sq.m

Total completed GFA 228,684.7 sq.m

Total saleable GFA 194,740.8 sq.m

Total GFA sold or pre-sold 191,871.9 sq.m

Construction period – commencement August 2010 – completion April 2013

Pre-sales commencement date(s) November 2010

Attributable interest to the Target Group 100%

Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB663,460,000

Phase II and Relocating District

Based on the internal records of the Target Group as at 31 October 2015, details of Phase II and Relocating District of this project are as follows:

Development Status Completed property project

Site area 224,939.2 sq.m

Total completed GFA 525,438.9 sq.m

Total Saleable GFA 353,914.5 sq.m

Total GFA sold or pre-sold 334,766.3 sq.m

Construction period – commencement May 2012 – completion November 2015

Pre-sales commencement date(s) September 2012

Attributable interest to the Target Group 100%

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Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB1,235,020,000

Forming part of the development of Phase II of Guangze•Amethyst City, there are resettlement residential units occupying an aggregate GFA of approximately 109,074.0 sq.m inside this project.

Guangze•Amethyst City is held and developed by Jilin Ground Real Estate, a wholly-owned subsidiary of the Target Company. According to the Property Valuation of the Target Group in Appendix VIB to this circular, as at 31 October 2015, the total capital value of Guangze•Amethyst City was RMB528,700,000.

(II) Guangze•Tudors Palace (廣澤‧瀾香)

Guangze•Tudors Palace (廣澤‧瀾香) is a residential project and has been developed by the Target Group since 2013. Guangze•Tudors Palace is adjacent to Guangze•Amethyst City and thus enjoys the same environment as Guangze•Amethyst City. Guangze•Tudors Palace comprises predominantly three-storey connected townhouses with private gardens. The size of the townhouses in Guangze•Tudors Palace generally ranges from approximately 200 sq.m to 500 sq.m.

The project occupies a site area of approximately 92,590.7 sq.m. In addition to the connected townhouses in Guangze•Tudors Palace, a three-storey building with a GFA of approximately 1,755.7 sq.m was also built. This building is currently being used by the Target Group as a sales centre for Guangze•Tudors Palace. It is expected that this building will be sold in its entirety with a view to transforming and developing it into a commercial complex serving the community.

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Based on the internal records of the Target Group as at 31 October 2015, details of this project are as follows:

Development Status Project under development

Site area 92,590.7 sq.m

GFA under development 107,469.0 sq.m

Total GFA sold or pre-sold 37,890.5 sq.m

Construction period – commencement January 2013 – expected completion March 2016

Pre-sales commencement date(s) February 2014

Attributable interest to the Target Group 100%

Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB439,680,000

Guangze•Tudors Palace is held and developed by Jilin Ground Real Estate, a wholly-owned subsidiary of the Target Company. According to the Property Valuation of the Target Group in Appendix VIB to this circular, as at 31 October 2015, the total capital value of Guangze•Tudors Palace was RMB1,143,000,000.

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Property Projects in Baishan City

(I) Guangze China House (廣澤蘭亭)

Guangze China House (廣澤蘭亭) is a residential project which locates at North of National Highway 201 in the Hunjiang District (渾江區), Baishan City. The vicinity of Guangze China House is dominated by various types of residential buildings. The site is about five minutes’ drive to the city centre of Baishan City and adjacent to the Baishan Park (北山公園). This property project has been developed by the Target Group since 2014 and the construction of which is divided into two phases.

Phase I of Guangze China House stands on parcels of land involving mid-rise and high-rise apartment buildings with an aggregate site area of approximately 47,270.5 sq.m. The size of the residential units in Phase I of Guangze China House generally ranges from approximately 70 sq.m. to 160 sq.m. The project is also expected to comprise anxillary commercial premises and underground car park.

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Phase I

Based on the internal records of the Target Group as at 31 October 2015, details of Phase I of this project are as follows:

Development Status Project under development

Site area 41,429.0 sq.m, plus 5,841.5 sq.m which is underground storage area)

GFA under development 128,736.3 sq.m

Total GFA sold or pre-sold 2,883.3 sq.m

Construction period – commencement December 2014 – expected completion December 2017

Pre-sales commencement date(s) January 2015

Attributable interest to the Target Group 100%

Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB104,870,000

Phase II

Development Status Project to be acquired

Site area 32,516.0 sq.m

Parcels of land with an aggregate site area of approximately 73,945.0 sq.m shall be acquired by the Target Group pursuant to a transaction confirmation letter issued by the Ministry of Land and Resources of Baishan City (白山市國土資源局) dated 10 February 2014. The land premium of approximately RMB25.78 million has been paid in full. As at the Latest Practicable Date, the land use rights certificate of approximately 32,516.0 sq.m had yet been obtained for the development of Phase II.

Guangze China House is held and developed by Baishan Ground Real Estate Development Company Limited, a wholly-owned subsidiary of the Target Company. According to the Property Valuation of the Target Group in Appendix VIB to this circular, as at 31 October 2015, the total capital value of Guangze China House was RMB308,000,000.

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(II) Guangze International Shopping Centre (廣澤國際購物中心)

Guangze International Shopping Centre (廣澤國際購物中心) is an integrated commercial and residential complex comprising a leisure and shopping centre (Guangze International Shopping Centre) and three residential buildings (Guangze International Shopping Centre – Residence) located at the city centre of Baishan City. The project commenced in November 2012 and the completion certificate has yet been obtained as at the Latest Practicable Date. The shopping mall commenced business operation in January 2015.

The project occupies a total site area of approximately 29,934 sq.m with a total leasable area of 51,686.04 sq.m, comprising retail spaces, and a total salable GFA of 95,205.63 sq.m comprising retail spaces, residential units and car park units (excluding civil air defense parking) sq.m.

Based on the internal records of the Target Group as at 31 October 2015, details of this project are as follows:

Development Status Completed Property Project for Sale

Site area 29,934.0 sq.m

Total completed GFA 168,180.0 sq.m

Total GFA held for investment 68,432.9 sq.m.

Total GFA leasable 51,686.0 sq.m

Total GFA sold or pre-sold 28,655.5 sq.m (commercial portion) 46,547.5 sq.m (residential portion)

Construction period – commencement November 2012 – completion December 2015

Pre-sales commencement date(s) October 2013

Attributable interest to the Target Group 100%

Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB609,580,000

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Commercial – Guangze International Shopping Centre

The leisure and shopping centre of this project comprises levels 1 to 5 of the building and the two basement levels, which together occupy a total GFA of 110,890 sq.m. Guangze International Shopping Centre is a comprehensive one-stop shopping mall that provides shopping, lifestyle, dinning and entertainment to satisfy the various needs of the customers. It is leased to a supermarket, restaurants and a number of domestic brands selling apparels, cosmetics, jewelleries and other lifestyle products. Guangze International Shopping Centre is managed by Baishan Ground Business Management, a wholly-owned subsidiary of the Target Company. For details of the leasing and management arrangement, please refer to the paragraphs headed “Property Management” and “Tenants and Tenant Management” in this section.

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The chart below shows the percentage of the retail units as at 30 November 2015 in each of the business sub-sectors:

Gold and Jewelleries 1.81% 3C digital products 1.66% Cosmetics 0.98% Leisure activities 3.11% Footwear 4.91% Supermarket Ancillary 32.02% facilities 12.19% Children entertainment 10.02%

Food and beverages 11.34% Apparels 21.96%

Residential – Guangze International Shopping Centre – Residence

The Guangze International Shopping Centre – Residence of this project locates on level 6 to 30 of this building and occupies a total GFA of approximately 57,110 sq.m., comprising approximately 600 units of high-rise apartments with unit size generally ranging from approximately 56 sq.m to 128 sq.m.

Guangze International Shopping Centre is held and developed by Baishan Ground Real Estate Development Company Limited, a wholly-owned subsidiary of the Target Group. According to the Property Valuation of the Target Group in Appendix VIB to this circular, as at 31 October 2015, the total capital value of Guangze International Shopping Centre was RMB1,029,000,000.

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Property Projects in Yanji City

(I) Guangze Red House (廣澤紅府)

Guangze Red House (廣澤紅府) is a residential project with ancillary commercial premises. This project is located at the south of Gongyuan Road (公園路) and east of Jindalai North Street (金達萊北街) in Yanji City. The site is about ten minutes’ drive to the centre of Yanji City and is adjacent to Yanji City Plaza (延吉市市府廣場) and the Wanda Plaza (萬達廣場).

Guangze Red House Phase I (廣澤紅府) will comprise mid-rise to high-rise apartment buildings with residential units ranging from approximately 80 sq.m. to 138 sq.m.. It is expected that this project will also comprise retail shops primarily serving the community and underground car park spaces.

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Guangze Red House

Phase I

Based on the internal records of the Target Group as at 31 October 2015, details of Phase I of this project are as follows:

Development status Project under development

Site area 32,986.9 sq.m

GFA under development 82,315.4 sq.m

Total GFA sold and pre-sold 23,038.0 sq.m

Construction period – commencement November 2014 – expected completion October 2016

Pre-sales commencement date(s) May 2015

Attributable interest to the Target Group 100%

Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB156,890,000

Phase II

Based on the internal records of the Target Group as at 31 October 2015, details of Phase II of this project are as follows:

Development status Project under development

Site area 51,854.9 sq.m

GFA under development 47,054.3 sq.m

Total GFA sold and pre-sold Nil

Construction period – commencement September 2015 – expected completion April 2018

Pre-sales commencement date(s) November 2015

Attributable interest to the Target Group 100%

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Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB149,310,000

Guangze Red House is held and developed by Yanji Huize, a wholly-owned subsidiary of the Target Group. According to the Property Valuation of the Target Group in Appendix VIB to this circular, as at 31 October 2015, the total capital value of Guangze Red House was RMB505,000,000.

On 9 August 2015, Yanji Huize and Yanji Ministry of Land and Resources signed a written confirmation (掛牌出讓公開交易成交確認書) in which it is recorded that Yanji Huize has successfully bid the land parcel (land lot no. 0962K0100) with a site area of approximately 51,854.9 sq.m for a consideration of approximately RMB122 million. This land parcel is for commercial and residential use. As of the Latest Practicable Date, Yanji Huize has obtained the land use rights certificates, construction land planning permits and a construction work planning permit for this property project.

Property Projects in Fusong County

(I) Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村)

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Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際度假村) is an integrated tourism project situated at Guosong Village in Donggang Town ( 東崗鎮), Fusong County (撫松縣), Baishan. It is about 20 km from the National Scenic Area of Tianchi (天池), Changbaishan, which is a level-5 national travel destination (國家5A級旅遊景區), and close to the south zone of a resort in Jilin Province, namely Wanda Changbaishan International Resort. As at the Latest Practicable Date, the Target Group has obtained the relevant land use rights certificates for 16 parcels of land with an aggregate site area of approximately 668,922.7 sq.m for the development of Changbaishan Ground Pine Township International Resort.

This comprehensive integrated tourism project will comprise the following tentative development plans:

(i) hotels – including hot spring hotel(s), boutique hotel(s), hotel(s) with ownership rights (產權式酒店) and serviced apartment(s) (酒店式公寓);

(ii) residential development – such as highrise apartments, mid to high rise apartments, low rise apartments and connected townhouses;

(iii) healthcare services;

(iv) recreational areas – such as hot spring facilities and theme park(s);

(v) club houses; and

(vi) retail commercial and dining areas

Based on the internal records of the Target Group as at 31 October 2015, details of Changbaishan Ground Pine Township International Resort are as follows:

Development Status Project held for future development

Expected site area 668,922.7 sq.m

GFA held for development and Maximum permissible GFA to be developed of 1,150,627.0 sq.m

Construction period – expected commencement March 2016 – expected completion December 2020

Attributable interest to the Target Group 65%

Based on the internal records of the Target Company up to 30 November 2015, the development costs incurred are as follows:

Development costs incurred RMB401,851,000

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The development plan of this project has not yet been finalised. The estimated GFA of each type of the initial developments in Changbaishan Ground Pine Township International Resort are as follows:

Estimated Changbaishan Ground Pine Township Saleable International Resort (長白山廣澤果松小 GFA/estimated 鎮國際度假村) leasable area Percentage (sq.m)

Hot Spring hotels 20,000.00 17.00% Hot Spring centre 15,000.00 12.75% Hot Spring serviced apartments 35,000.00 29.76% Commercial district (lodge 客棧, commercial) 25,000.00 21.26% Experience Centre 2,306.97 1.96% Boiler space 15,000.00 12.75% Dormitory 5,306.00 4.51%

Total 117,612.97 100.00%

Changbaishan Ground Pine Township International Resort is held and developed by Fusong Ground, which is owned indirectly as to 65% by the Target Group and 35% by the Company. According to the Property Valuation of the Target Group in Appendix VIB to this circular, as at 31 October 2015, the total capital value of Changbaishan Ground Pine Township International Resort was RMB3,310,000,000.

On 26 July 2014, in consideration of the intended development of serviced apartments in Changbaishan Ground Pine Township International Resort, Fusong Ground has entered into a hotel management cooperation agreement (“Management Cooperation Agreement”) with a property management consulting company (“Property Management Consulting Company”), which is an Independent Third Party. The salient terms of the Management Cooperation Agreement are:

• Fusong Ground shall appoint the Property Management Consulting Company as the recognised service provider in providing the hotel management services to the purchasers of the serviced apartments in the Changbaishan Ground Pine Township International Resort;

• Fusong Ground shall promote the hotel management services provided by the Property Management Consulting Company for the election by the purchasers;

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• The Property Management Consulting Company shall enter into a separate property management agreement with the individual purchasers of each unit of the serviced apartments if they choose the services;

• The term of cooperation is from 26 July 2014 to 30 September 2020; and

• Each party is entitled to terminate the Management Cooperation Agreement by giving one month’s prior written notice to the other party.

On the same date, Fusong Ground has also entered into a standard housekeeping services cooperation agreement (“Housekeeping Cooperation Agreement”) with the Property Management Consulting Company, pursuant to which Fusong Ground purchases the housekeeping services provided by the Property Management Consulting Company for the serviced apartments in Changbaishan Ground Pine Township International Resort. The term of cooperation commences from the date of delivery of the serviced apartments to 30 September 2020. The Target Group believes that the engagement of the professional management company can enhance the overall value and attractiveness of the property.

PROJECT MANAGEMENT

The Target Group was principally engaged in development, operation, sale, leasing and management of residential, commercial and tourism properties. The Target Group has established standardised and systematic project management procedures for all aspects of properties developed by the Target Group.

The Target Group has established a two-tier management system comprising the headquarters and the project companies. The headquarters consists of the highest decision making board and seven management centres. Both the headquarters and the project companies of the Target Group are responsible for the project management of the Target Group but in different aspects. There are detailed procedures and guidelines in the Target Group setting out the responsibilities and reporting duties so as to facilitate communications and decision-making within the Target Group. The headquarters of the Target Group retain overall control through its seven management centres, comprising sales management centre (營銷管理中心), project management centre (項目管理中心), research and design department (研發設計中心), tender and procurement centre (招標採購中心), cost and contract centre (成本合約中心), finance management centre (財務管理中心) and human resources and administrative centre (人力行政中心). The headquarters are also responsible for market research, land acquisition and project financing. The project companies are in cities where the project developments are located and are responsible for the daily operations of the projects, including but not limited to, project design,

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Departments Functions

General office Human resources, general administration and project development

Project management department Construction and design

Sales department Sales and customer relations

Cost and contract department Cost control and procurement

Finance department Finance

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PROJECT DEVELOPMENT

The Target Group has established standardised and systematic procedures of planning and execution of property developments, which are generally divided into the following stages:

1. market research and site selection

2. land acquisition

3. project financing

4. project design

5. pre-construction planning

6. construction

7. quality control

8. pre-sales

9. sales, marketing and leasing

10. completion and delivery

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Market research and site selection

The headquarters together with the project companies of the Target Group conduct market research and site selection for identifying target locations and potential projects. The market research and site selection process are led by project management centre (項目管理中心) of the headquarters with the participation of the sales management centre (營銷管理中心) and the cost and contract centre (成本合約中心). This process would generally include an assessment of the following:

• the overall strategic plan laid down by the headquarters of the Target Group;

• the size, shape and location of the land parcel;

• the government planning, zoning and development plans, policies and regulations relating to the relevant site and the neighbouring area;

• the competitiveness of the social, economic conditions and customs of the area in which the site is located;

• the local population, target customers’ demand and purchasing power, market positioning, transportation networks and infrastructure;

• the macroeconomic conditions and financing risks; and

• the development costs and time required, cash flow arrangements and expected financial returns.

Having considered all the relevant factors set out above, the Target Group will identify potential land parcels for development and compile a project feasibility or application report to evaluate the potential risks and return of the development and provide suggestions for the development and its design. Such project feasibility report or application report may be submitted to the relevant municipal development and planning commission of the PRC authorities for approval.

Land acquisition

The Target Group generally acquires land use rights held by the local PRC government directly for development through the acquisition of land use rights by participating in competitive bidding, public auction and listing-for-sale processes. In accordance with the 2002 Regulations as revised on 21 September 2007 by the 2007 Regulations and the Notice on Continuing the Review of the Implementation of the Grant of Land Use Rights for Commercial Uses by Invitation of Bids Auction or Listing《關於繼 ( 續開展經營性土地使用權招標拍賣掛牌出讓情況執法監察工作的通知》) dated 31 March 2004, the grant of land use rights for operating and developing purposes must be made pursuant to auctions or listing at a land exchange and that no land use rights for operating and developing purposes may be granted by way of agreement after 31 August 2004.

Please refer to the section headed “Regulatory Overview” set out in Appendix II to this circular for further details of the applicable PRC laws and regulations.

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In conjunction with the acquisition of land interests from the PRC government, property developers in the PRC are required to pay a land premium to the relevant government authority and apply for the land use rights certificate in relation to the land interests. In general, upon the payment of the land premium to the relevant land authorities, land use rights in the PRC are granted in respect of the relevant land parcels for a term of 70 years for residential properties, 40 years for commercial properties and 50 years for comprehensive-use properties.

The Target Group may also negotiate with third parties to acquire land subject to compliance with applicable laws.

Project financing

During the Track Record Period, the Target Group financed the development of its property projects through property development bank loans and internally generated funding, such as pre-sale proceeds. The Target Group determined the total financing costs for each of its property projects based on various reasons such as the mode, the cost and the total amount of financing required, the development status of the project, etc. The finance management centre (財務管理中心) at the headquarters of the Target Group is responsible for negotiation of bank loans and other financing arrangements whereas the project companies generally enter into the relevant loan documents and coordinate with the headquarters. To determine whether and when external financing should be sought, the Target Group will generally take into account a number of factors including availability of internal resources, cost of financing and cash inflow from its operating activities from time to time.

The Target Group also uses proceeds from the pre-sale of its property projects to fund part of the construction costs of that particular projects in accordance with the relevant PRC laws and regulations. Proceeds from pre-sale activities form one of the integral sources of operating cash inflows during the project development stage.

The Guidelines on Risk Management for Real Estate Loans Business of Commercial Banks《商業銀行房地產貸款風險管理指引》 ( ) issued by the China Banking Regulatory Commission (中國銀行業監督管理委員會)(“CBRC”) on 30 August 2004 provide that no bank loan may be granted in relation to projects which have not obtained the relevant land use rights certificate, construction land planning permit, construction work planning permit or construction commencement permit. These guidelines also stipulate that for real estate enterprises, not less than 35% of the total investment in a property development project must come from a property developer’s own capital in order for banks to be able to extend loans to the property developer. On 25 May 2009, the State Council issued a Notice on Adjusting the Capital Ratio of Fixed Assets Investment Project《國務院關於調整固定資 ( 產投資項目資本金比例的通知》). The notice provides that the minimum capital requirement for affordable housing and ordinary commodity apartments is 20%, and the minimum capital requirement for other real estate development projects is 30%.

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Subject to the guidelines issued by CBRC, the Target Group also finances its projects through bank loans. As at 31 October 2015, the Target Group’s current and non-current bank borrowings amounted to approximately RMB782.4 million. Please refer to the paragraph headed “Statement of Indebtedness” in the section headed “Financial Information of the Target Group” in this circular for further details. Save as disclosed above, during the Track Record Period and up to the Latest Practicable Date, there had been no material default of any of the bank loans by the Target Group.

Project design

The research and design centre (研發設計中心) at the headquarters of the Target Group is responsible for planning and determining the master design concept for the property projects, including architectural design, layout, decoration and fittings, by taking into consideration of factors such as terms and conditions of land grant, requirements of the land bureau, environmental feasibility internal cost management. Third-party architectural and design firms will then be engaged to carry out design work for the property projects largely based on the master design concept and the requirements provided by the Target Group. The project companies also assist and coordinate with the headquarters by participating in the negotiation and cooperation with these third-party architectural and design firms.

The third-party architectural and design firms are typically selected through public tender, tender by invitation or direct engagement. For the purpose of selecting the winning bidder, the research and design centre (研發設計中心) at the headquarters/a newly formed tender committee comprising members at the headquarters and senior management of the project companies will take into account factors including the originality and feasibility of the design, economic and cash flow optimisation, overall strengths and industry experience of the design firms.

The research and design centre (研發設計中心) at the headquarters manages and monitors the work of the relevant architectural and design firm to ensure the project design meets the quality standards, reflects the design concept and desired product positioning, and meets potential customers’ tastes and preferences. Other centres of the Target Group such as the sales management centre (營銷管理中心) and the cost and contract centre (成本合約中心) are also involved in the above process to ensure that such architectural and design firms deliver feasible designs and planning proposals within the budget and in line with the marketing strategies of the Target Group.

The Target Group collaborates closely with these selected architectural and design firms to develop a conceptual design proposal and develop it into a detailed design and planning proposal. The design and planning proposal together with a proposal on the use of land may be submitted to the relevant PRC authorities for approval, where required.

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Pre-construction planning

Regulatory approvals

According to the PRC regulations, once a property developer has obtained an interest in land for the development of a project, it must obtain various governmental approvals in order to commence the planning and construction of the relevant properties. In particular, the following permits would be required before construction may commence:

• a construction land planning permit, which allows a developer to conduct the survey, planning and design of a parcel of land;

• a construction work planning permit, which approves the overall planning and design of a project submitted by a developer; and

• a construction work commencement permit, which is required for the commencement of construction.

Please refer to the section headed “Regulatory Overview” set out in Appendix II to this circular for further details of the applicable PRC laws and regulations.

Construction

The tender process

The Target Group outsources the construction works for its property projects (including foundation and piling, slope protection, construction and engineering, fitting-out and interior decoration of properties and show flats) to qualified independent contractors which are engaged through tender process in accordance with the applicable PRC laws and regulations. The internal tender process is managed by the tender and procurement centre (招標採購中心) at the headquarters which works closely with the cost and contract centre (成本合約中心) at the headquarters, the cost and contract department (成本合約部) and the tender and procurement department (招標採購中心) of the relevant project company.

The Target Group has established a selection procedure that sets out the relevant requirements of the tendering process and selection criteria for construction contractors in order to ensure compliance with the quality and workmanship standards of the Target Group. For the purpose of assessing the winning bidder, a newly formed tender committee comprising members of the central management of the Target Group as well as senior management of the project companies will take into account the factors such as the reputation for quality of the bidder, track record, professional qualifications and recognition, construction plan, resources of the bidder and the price quoted by the bidder.

The winning construction contractor is obliged to undertake the construction work in strict compliance with the designs and quality control requirements of the Target Group and to provide regular progress reports to the Target Group and for monitoring the construction progress.

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Construction contracts and key terms

The Target Group enters into standard construction contracts with its construction contractors. Under the terms of these standard construction contracts, the Target Group is generally required to pay a construction fee to the contractors. The main contractors may also be entitled to a coordination fee (總包管理及配合費) for managing and coordinating with other contractors in the same project. Payments of the construction fee and coordination fee to contractors by the Target Group are made in stages in accordance with the terms and conditions stipulated in the standard construction contracts. The percentage of payment at each stage may vary from case to case. In respect of the construction fee, generally upon completion of the construction of the project, obtaining satisfactory results on the completion acceptance report and the delivery of the satisfactory completion documents in respect of such project, the contractor will be paid approximately 80% of the total contractual amount. At closing and settlement, the Target Group will generally settle up to approximately 95% of the total contractual amount, and retain the remaining 5% for a period of two to five years in general as retention money for warranty purposes. The retention money is used to cover any contingent expenses incurred as a result of any construction defects. Generally, the unused portion of the retention money will be returned to the contractors upon the expiry of the warranty period. The duration of the construction contracts will depend on the type of the construction work and the development schedule of the Target Group. A construction contract may be terminated if the contractor fails to comply with the construction schedules of the Target Group, fails to rectify construction defects as requested by the Target Group or is otherwise in breach of the relevant terms of the construction contract.

Under the terms of construction contracts, the contractors are required to provide warranties to the Target Group for the quality of construction works carried out and the warranty periods are generally of two to five years. The contractor is also required to pay penalties in the event of any delay in construction schedule and failure to fulfil quality requirements stipulated under the construction contracts. The contractor is responsible for rectifying any construction defects within the time frame specified by the Target Group.

The contractors are responsible for procuring the main construction materials, including steel, concrete and cement, required for construction and hence the risk of price fluctuations is absorbed by them. Under the terms of the construction contracts, the contractual construction fees may be adjusted in accordance with fluctuations in the prices of certain construction materials against the standard price published by the local PRC authorities. Therefore, the Target Group bears some of the risks associated with construction materials price movements. Please refer to the sensitivity analysis for costs of properties sold set out in the paragraph headed “Sensitivity Analysis” in the section headed “Financial Information of the Target Group” of this circular. As the Target Group pre-sell properties prior to their completion, it may not be able to pass on any increases in construction costs to customers if construction costs increase subsequent to such pre-sale. Please refer to the paragraph headed “Risks relating to the business of the Enlarged Group – Increases in construction and development costs may have an adverse impact on the Enlarged Group’s results of operations” in the section headed “Risk Factors” in this circular. During the Track Record Period, the Target Group did not experience any

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All contractors engaged by the Target Group during the Track Record Period were Independent Third Parties, which have around up to five years of business relationships with the Target Group.

During the Track Record Period, the Target Group had not been subject to any penalty, material claim, or direct loss resulting from unsatisfactory work performed by its contractors or from construction delays.

Procurement of supplies

The majority of the construction materials, including steel, concrete and cement, and other necessary building and fitting-out materials required for construction, development and interior decoration of a property project is sourced by the relevant contractors engaged by the Target Group. To ensure the quality of these construction materials, the Target Group also designates the brands and specifications of certain key construction materials for which the contractors are responsible for procuring or identifies a few suppliers from whom such materials should be purchased from. Certain supplies of electrical and utility materials, such as elevators, fire-proof doors, sockets, radiator and water pumps are procured by the Target Group directly from the relevant suppliers in the PRC, which are Independent Third Parties, to suit the specific needs and designs of a particular project. The procurement of construction materials and equipment is managed based on factors including expected development schedules. The Target Group does not maintain an inventory for construction materials and equipment and procurement is made on an as-needed basis.

The Target Group typically selects its suppliers for its self-procured construction materials through tender process or direct engagement. For the purpose of selecting the winning bidder, a newly formed tender committee comprising members of the headquarters of the Target Group as well as senior management of the project companies will take into account factors such as reputation, track record of the supplier and price of the supplies. The cost and contract centre (成本合約中心) and the tender and procurement centre (招標採購中心) of the Target Group take the lead in the negotiation of procurement prices with the suppliers and the cost and contract department (成本合約部) and project management department (項目管理部) of the project companies conducts inspection on the construction materials and equipment to ensure compliance with the contractual specifications before accepting the materials and approving payment. The Target Group may reject and return to the suppliers any materials which are sub-standard or which do not comply with the relevant specifications.

The Target Group enters into supply contracts with the selected suppliers for the procurement of construction materials and equipment. The payment methods under the supply contracts vary depending on the types of construction materials procured. The suppliers are generally paid in stages, for example upon signing of the supply contracts or

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During the Track Record Period, the Target Group did not experience any shortage or delay in the supply of construction materials and equipment that had a material adverse effect on its business operations nor did it experience any material fluctuations in the procurement costs of construction materials and equipment.

Quality control

The Target Group places great emphasis on quality control on its project development process and it has formulated standardised quality control policies and procedures in place, by which all relevant departments of the project companies are required to strictly abide. These policies and procedures apply to different aspects of the development of property projects including, among others, fitting-out, construction materials, equipment, construction works relating to fire control and the quality of the completed property project.

Under the terms of the standard construction contract, the contractors are required to comply with the relevant PRC laws and regulations relating to construction quality, internal quality control standards and specifications.

Certified construction supervisory companies (監理) are engaged to monitor the on-site construction progress quality and safety control checks in accordance with the requirements under the relevant PRC laws and regulations to ensure the safety and quality of the construction. All these construction supervisory companies are Independent Third Parties. The project management department (項目管理部) of the project companies is mainly responsible for coordinating with other departments and the third-party supervisory companies to implement these quality control procedures. Pursuant to the construction supervisory contracts, these construction supervisory companies are required to conduct inspections and report the progress and quality of the projects regularly. The Target Group settles the construction supervisory fees by installment upon the completion of the specified stage(s) of construction.

Upon completion of construction and fitting-out of properties, the project management department (項目管理部) of the project companies will check and inspect the properties to ensure that its condition is satisfactory prior to delivery of such properties to customers or making such properties available for leasing.

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The Target Group also conducts internal inspection procedures on supplies including fitting-out materials and equipment sourced by the project companies. The Target Group/the project management department (項目管理部) of the project companies inspects the quality of supplies to ensure that they meet the required standards for the purpose of the relevant projects. Supplies or equipment that do not meet the required quality standards are not used in projects and are returned to the relevant suppliers.

During the Track Record Period and up to the Latest Practicable Date, the Target Group had not received any complaints from its customers on the quality of its properties which have led to material claims against the Target Group.

Pre-sales

Provided that a pre-sale permit has been obtained in accordance with the applicable PRC laws and regulations, the Target Group commences pre-sales activities prior to completion of construction of the entire property project. The Target Group would usually arrange for the contractor to establish a fully-furnished show flat for the type of unit within such property development intended to be sold during the pre-sale period. As advised by the PRC legal advisers to the Company, the Target Group had obtained relevant pre-sale permits under the PRC laws and regulations for commencing pre-sale of those properties the Target Group was pre-selling. In accordance with the PRC laws and regulations, sales proceeds received from pre-sales of the Target Group’s projects are used to finance the developments of that particular project.

Leasing, sales and marketing

Marketing of property projects for leasing and sale

The Target Group promotes its property projects for leasing and sales through its sales management centre and the sales department (營銷部) of each project company. As at the Latest Practicable Date, the Target Group had a sales and marketing team comprising a total of 40 employees at the headquarters and the project companies. The sales management centre (營銷管理中心) at the headquarters is responsible for conducting feasibility studies, formulating overall marketing strategies and promotional campaigns. The sales department (營銷部) at the project company level collaborates marketing plans for the relevant projects on a regular basis, based on local market conditions, phases of construction, targeted customers’ preferences and demands, locations of projects, product positioning and available budget. Such marketing plan will usually be submitted to the headquarters of the Target Group for review and approval. During the Track Record Period, the means of marketing taken by the Target Group include launching both indoor and outdoor advertisements, through different media, such as newspaper and magazines, brochures, roadside billboards and LED digital displays in taxis.

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Leasing

As at the Latest Practicable Date, the Target Group held one investment property, namely the unsold portion of the Gaungze International Shopping Centre, for leasing purpose. The leasing department (租賃部) of the relevant project company is responsible for leasing. As at the Latest Practicable Date, the Target Group had a leasing team comprising a total of 40 employees. The Target Group selects potential tenants by its branding, economic strength and market needs.

In order to maximise rental returns and establish long-term and stable relationships with its tenants, the Target Group carefully plans and selects tenants taking into account the property project’s overall positioning, product types, market demand in surrounding areas, market rent, as well as the background and profile of tenants. As the majority of the Target Group’s investment properties for leasing involve retail space, the Target Group generally attracts and maintains a diversified mix of tenants, comprising retailers of international and domestic labels in apparel, sportswear, bags, luggage and footwear products. Please refer to the paragraph headed “Tenants and Tenant Management” in this section for further details.

Since the Guangze International Shopping Centre opened in January 2015, during each of the three years ended 31 December 2012, 2013 and 2014, the Target Group generated nil gross rental income from investment property. For the eight months ended 31 August 2015, the Target Group generated rental income of RMB10.4 million from investment property.

Sales

The sales management centre (營銷管理中心) of the Target Group formulates pre-sales, sales and pricing plans for approval by senior management. Sales prices are usually determined with reference to the sale price of similar property projects around the area, prevailing market conditions and development costs. The Target Group holds promotional and sales events during which property development models and show flat units are set up.

The Target Group sells its properties for sale through the in-house sales team within the sales management department (營銷管理部) of the relevant project company. As at the Latest Practicable Date, the Target Group had a marketing and sales team of more than 40 employees.

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Completion and delivery

Customer payment arrangements

Prior to the execution of formal sale and purchase contracts, the Target Group and the customers usually enter into provisional sale and purchase contracts and the customers are required to pay a non-refundable deposit. Generally, the Target Group will be entitled to forfeit the deposit if the customers fail to enter into formal sale and purchase contracts. Pursuant to the formal sale and purchase contracts, the customers may choose to make payment either by a lump sum or mortgage financing. Where a customer chooses to pay by mortgage payment, the customer is required under the sale and purchase contract to pay a down payment in cash upon the execution of the sale and purchase contract, with the remaining amount settled by the mortgage loan from the relevant mortgagee banks.

In line with market practice in the PRC, the Target Company has arrangements with various banks for the provision of mortgage facilities to its customers and where required by the banks, provides guarantees in favour of the banks in respect of the mortgage facilities granted by them to the customers. As a guarantor, the Target Company is liable for repaying the mortgage principals together with the interests and penalties to the mortgagee banks in the events of defaults by the customers. The obligations of the Target Company under the guarantees are usually released upon the mortgage documents having been filed with the relevant authorities, the relevant property ownership certificates and the Certificate of Third Party Rights (他項權證) having been obtained and delivered to the mortgagee banks, or the settlement of mortgage loans between the mortgagees banks and the customers of the Target Company. In line with industry practice, the Target Company does not conduct independent credit checks on the customers but rely instead on the credit checks conducted by the mortgagee banks. As at 31 December 2012, 2013 and 2014 and 31 August 2015, the outstanding guarantees in respect of mortgages for certain customers of the Target Group amounts to approximately RMB6.0 million, RMB14.0 million, RMB12.5 million and RMB5.2 million respectively. During the Track Record Period and up to the Latest Practicable Date, the Target Group did not encounter any incidents of default by purchasers which resulted in the Target Group having to repay the outstanding amounts owed by the purchaser to the mortgagee bank. Please refer to the paragraph headed “Statement of Indebtedness – Contingent liabilities” in the section headed “Financial Information of the Target Group”.

Delivery of properties for sale

The sales management department (營銷管理部) of each of the project companies is primarily responsible for handling delivery of properties to customers and any queries or complaints that the customers may have in relation to the properties delivered to them. The Target Group is committed to delivering properties sold to its customers in a timely manner, in accordance with the delivery time frame set out in its sales contracts with customers. The Target Group aims to deliver quality properties and satisfactory purchasing experiences to our customers. Under the current PRC rules and regulations, the Target Group is required to pass a completion and acceptance inspection prior to delivering properties to its customers. Generally, under the sales and purchase contracts, damages will be payable by the Target Group in the event of delay in delivery.

During the Track Record Period and up to the Latest Practicable Date, the Target Group did not experience any significant delays in completion of its projects or delivery of relevant title documents after sale.

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Pursuant to the sales and purchase contracts with the customers, the Target Group provides warranties on the quality of certain structures and fittings of the properties to be sold in accordance with the applicable PRC laws and regulations. The warranty periods typically commence on the day of delivery of the relevant properties and are generally in line with the warranty periods provided by the contractors to the Target Group. The warranties do not cover defects which are caused by events not within the control of the Target Group. In addition, these sales and purchase contracts provide for certain circumstances where the customers are entitled to terminate the transactions and/or return the properties, including the following:

• defects in the title of the properties resulting in the failure of registration of title;

• material discrepancies in the GFA of the properties delivered as compared to the GFA stipulated;

• material delays in the delivery of the properties which exceed the periods stipulated;

• material changes to the design of the properties resulting in changes in property layout, spatial dimension and orientation as stipulated; and

• material quality defects with respect to the properties.

During the Track Record Period and up to the Latest Practicable Date, the Target Group did not receive any material complaints or claims from customers regarding the quality of its properties.

After-sales services

Two of the Target Group’s subsidiaries, namely Jilin Ground Property Services and Baishan Ground Property Services are primarily responsible for providing after-sales services of the properties delivered to customers. The after-sales services provided by the Target Group include after-sales and property management services in relation to the properties and their facilities.

URBAN REDEVELOPMENT

The Target Group has cooperated with local government authorities in the PRC to carry out redevelopment of shanty towns (棚戶區) in the PRC. The Target Group has entered into framework development agreements with local government authorities under which the local government authority will be responsible for carrying out the land resettlement operations (including negotiation and signing of land resettlement agreements with local residents) prior to the land being put up for public bidding process and the Target Group will be responsible for assisting with the planning of the redeveloped area and construction of resettlement housing after obtaining the relevant land use rights. The Target Group believes that its brand image and working relationship with the local authorities can be enhanced by cooperating with the local authorities in the urban redevelopment, which in turn positions the Target Group favorably in the subsequent public land bidding process. Pursuant to the development agreements, the Target Group also enjoys preferential rates for certain governmental and administrative

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PROPERTY MANAGEMENT

The Target Group provides property management service to its own residential projects through its subsidiary, namely Jilin Ground Property Services. This subsidiary has obtained level two of qualification for property management respectively as accredited by the Ministry of Housing and Urban-Rural Development (中國住房和城鄉建設部) of the PRC. It is also accredited with GB/T/19001-2008/ISO 9001:2008 (quality management system standard) for its property management services in respect of the residential area and the ancillary commercial premises. For the three years ending 31 December 2012, 2013 and 2014 and eight months ended 31 August 2015, the revenue generated from the property management and related services of the Target Group was approximately RMB4.4 million, RMB9.2 million, RMB11.4 million and RMB17.4 million respectively.

Residential projects

Among the completed property projects of the Target Group, the property management services for Guangze•Amethyst City are provided by Jilin Ground Property Services pursuant to a property management services agreement entered into between Jilin Ground Property Services and Jilin Ground Real Estate on 17 November 2010. The property management services provided to Guangze•Amethyst City with the support of third party contractors including elevator maintenance and repair, cleaning and sanitary services and greenery maintenance. Jilin Ground Property Services receives property management fee according to a pre-determined rate depending on the property type, which is payable by the individual property owners in respect of the GFA sold to them and the property developer, namely Jilin Ground Real Estate, in respect of the GFA it retains, on a yearly basis.

Additionally, the property management services for Guangze • Tudors Palace are also provided by Jilin Ground Property Services pursuant to a property management services agreement entered into between Jilin Ground Property Services and Jilin Ground Real Estate on 19 December 2013 commencing on 1 November 2013. The property management services provided to Guangze • Tudors Palace include maintenance and repair, sanitary services, greenery maintenance and decoration and refurbishment management. Jilin Ground Property Services receives property management fee according to pre-determined rate depending on the property type, which is payable by the individual property owners in respect of the GFA sold to them and the property developer, namely Jilin Ground Real Estate, in respect of the GFA it retains, on a yearly basis.

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Commercial property project

The operation and management services of Guangze International Shopping Centre is provided by Baishan Ground Business Management pursuant to an agreement entered into between Baishan Ground Business Management and Baishan Ground Real Estate on 1 December 2014 for a term of 20 years commencing from 1 January 2015. Baishan Ground Business Management is responsible for the management of Guangze International Shopping Centre with the support of a third party service provider which was to provide security and cleaning and sanitary services pursuant to the relevant service agreement entered into between the branch office of Jilin Ground Property Services and such third party service provider on 1 February 2015 for a term of twelve months commencing from 1 February 2015.

Going forward, the Target Group intends to continue to provide property management services to the completed property projects of the Enlarged Group. When appropriate opportunities arise, the Target Group may explore the feasibility in providing property management services to property projects of other third party property developers in the PRC.

TENANTS AND TENANT MANAGEMENT

As at the Latest Practicable Date, the retained and unsold area in Guangze International Shopping Centre attributable to the Target Group was the only investment property of the Target Group and held by the Target Group for leasing purpose. As at 30 November 2015, the Target Group had leased an aggregate of approximately 28,000 sq.m. in Guangze International Shopping Centre to over 410 tenants and also acted as the leasing and management agent for an aggregate of approximately 21,000 sq.m. therein which were sold to third party owners. Among its residential projects developed, the Target Group has not leased any area therein.

Guangze International Shopping Centre was developed by Baishan Ground Real Estate, a wholly-owned subsidiary of the Target Group. The operation of Guangze International Shopping Centre was entrusted with Baishan Ground Business Management, another wholly-owned subsidiary of the Target Group, pursuant to an agreement entered into between Baishan Ground Real Estate and Baishan Ground Business Management on 1 December 2014 for a term of 20 years commencing from 1 January 2015. Under this agreement, Baishan Ground Business Management is responsible for operating Guangze International Shopping Centre and its obligations include selecting prospective tenants, signing lease agreements and determining the terms and conditions thereof, collecting and receiving rents and delivering and taking possession of the leased property and so forth. As consideration for its services provided under this agreement, Baishan Ground Business Management is entitled to receive 30% of the net profits derived from Guangze International Shopping Centre. The general property management services for Guangze International Shopping Centre is provided by the branch office of another wholly-owned subsidiary in the Target Group namely 吉林市廣澤物業服務有限公司白山國購分公司 (Jilin Ground Property Services (Guangze International Shopping Centre Branch)*).

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In respect of the areas in Guangze International Shopping Centre that were sold to individual purchasers and for the purpose of exercising overall operation and management of the property, each individual owner has entered into an entrusted operation and management agreement (“Entrustment Agreement”) with Baishan Ground Business Management to authorise Baishan Ground Business Management to, among other matters, identify suitable tenant for the relevant shop in the property and sign related tenancy agreements for and on behalf of the individual owner. In consideration of its services provided to the individual tenants, Baishan Ground Business Management will receive a proportion of the operating profits payable by the tenants. As at the Latest Practicable Date, Baishan Ground Business Management has entered into over 900 Entrustment Agreements with such individual owners for a fixed term of six years starting from the commencement of business of the Guangze International Shopping Centre in January 2015.

The principal terms and conditions of such Entrustment Agreement entered into with the individual purchasers of the properties at Guangze International Shopping Centre are summarised below:

Rental payment • For the first three years, the property owner shall be entitled to 8% of the purchase price of the property.

• For the remaining three years, the property owner shall be entitled to a minimum of 8% of the purchase price of the property together with 90% of any excess rental received by Baishan Ground Business Management.

The rental payment is made half yearly.

Rights and obligations of • The property owner shall have the right to the property owners mortgage, assign, transfer as gift or leave by will the property.

• The property owner shall notify Baishan Ground Business Management of the above one month in advance, and make an undertaking that the assignee/mortgagee/transferee fully understands the rights and obligations under the Entrusted Agreement and agrees to continue fulfilling the same thereunder.

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Right and obligations of • Baishan Ground Business Management shall Baishan Ground have the right to operate, use the property or Business Management sublet the same to a third party

• Baishan Ground Business Management shall be responsible for the uniform management and lease of properties at Guangze International Shopping Centre

• Baishan Ground Business Management shall promptly and fully make payments to the property owner as provided under the Entrustment Agreement

• Baishan Ground Business Management shall have the right to renovate and refurnish the property subject to the structural safety conditions

Right to renew • If the property owner agrees to maintain the operational plan in place, then the parties may separately enter into another Entrustment Agreement. Before 90 days prior to the expiry of the current Entrustment Agreement, the property owner has the right to renew and the parties may separately enter into a new Entrustment Agreement in accordance with the then rental fees level.

Termination • In the event the owners committee resolves to amend or terminate the Entrustment Agreement, both parties shall accept unconditionally.

• In the event either party a) commits a breach of the Entrustment Agreement rendering the non-fulfilment of the same or b) unilaterally terminates the Entrustment Agreement, the party in breach shall be liable to the other party for the payment of 30% of the purchase price of the property.

In respect of tenant selection, Baishan Ground Business Management will take into account various factors including the types of goods and services a prospective tenant intends to offer, brand reputation, business track records and the overall strengths of a prospective tenant. Once confirmed and agreed, the prospective tenants of Guangze International Shopping Centre generally enter into a standard lease agreement with Baishan Ground Business Management or Baishan Ground Real Estate which covers

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The Target Group aims to maintain a balanced mix of tenants in Guangze International Shopping Centre. As Guangze International Shopping Centre is positioned as an integrated leisure and shopping centre, the overall goal is to attract and retain tenants engaged in not only the retail business but also entertainment and leisure related businesses. Among the tenants of Guangze International Shopping Centre, while there are over 340 retail shops selling apparels, footwear, cosmetics and jewellries, there are over 35 tenants engaged in children entertainment as well as over 70 tenants providing food and beverages services and an anchor tenant engaged in supermarket business.

The terms of these lease agreements with the tenants of Guangze International Shopping Centre generally range from one year to six years with the exception of one anchor tenant. The anchor tenant conducts supermarket business at basement level 1 and part of level 1 of Guangze International Shopping Centre and has entered into a lease agreement with Baishan Ground Business Management for a term of 20 years. Upon expiry of the lease term, the tenants have the right of renewal subject to negotiation and agreement between the parties regarding rent adjustment and length of the further lease term.

In respect of rental pricing policy, the rent is typically fixed and calculated on the basis of the area of the individual leased property. The tenants are required to pay their rent in advance on a monthly basis. Baishan Ground Business Management also charges the relevant tenants the business services fee (商業服務費) for its provision of services such as event planning and related sales promotion activities, consultation on sales promotion proposals and so forth. The business services fee is calculated and charged on the basis of (rent – property management fees)* 20% and payable in advance by the tenant on a monthly basis.

In addition, in order to provide more flexibility to accommodate various types of potential tenants, the Target Group also adopts rental arrangements with some of its tenants whereby no fixed monthly rent is charged. In respect of those rental arrangements, the rent is typically calculated at a certain percentage of the total sales volume received by the tenants. The Target Group believes that variety in pricing and rental arrangements enables Guangze International Shopping Centre to attract tenants with different business profile and ability to pay rent.

Baishan Ground Business Management adopts and applies a unified set of operation and management policy for the tenant management of Guangze International Shopping Centre (商戶經營管理制度)(“GSIC Management Policy”). All tenants of Guangze International Shopping Centre are required to comply with the GSIC Management Policy as one of the terms in their lease agreements. In particular, the tenants are required to conduct their business in a way which must not damage the overall image of the complex. For example, the tenants of Guangze International Shopping Centre must not sell fake or substandard goods and must conduct their business in compliance with laws and regulations. Material violation of the GSIC Management Policy may constitute breach of the relevant lease agreement, which may be terminated by Baishan Ground Business Management or Baishan Ground Real Estate (as the case may be).

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In addition, Baishan Ground Business Management monitors the operation and performance of individual stores in Guangze International Shopping Centre to assess their appeal to customers and to evaluate general performance. Upon noting any irregularity or poor performance in the conduct of business by any tenant, Baishan Ground Business Management will initiate discussions with such tenant and offer its advice.

PROPERTIES USED BY THE TARGET GROUP FOR OPERATION

As at 31 October 2015, the Target Group leased 4 properties in the PRC as office use with an aggregate GFA of approximately 443 sq.m.

SUPPLIERS AND CUSTOMERS

Suppliers

The suppliers of the Target Group primarily include domestic construction contractors and construction materials suppliers in the PRC.

The five largest suppliers of the Target Group, which are construction contractors, accounted for approximately 44.9%, 70.5%, 42.5% and 54.1% respectively of the Target Group’s total purchases for each of the three years ended 31 December 2012, 2013 and 2014 and eight months ended 31 August 2015 respectively. The length of relationship of the five largest suppliers with the Target Group was between two to five years. Purchases from the largest supplier accounted for approximately 11.5%, 25.1%, 15.9% and 24.8% respectively, of the Target Group’s total purchases for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively. The five largest suppliers of the Target Group during the Track Record Period are all Independent Third Parties. For details of the agreement with the suppliers, please refer to the section headed “Project Development – Construction – Construction contracts and key terms” in this circular. The Target Group has also entered into framework agreements with some of its suppliers for the provision of certain products or services, such as the heating construction and lift installation etc. These framework agreements typically specify the specifications and pricing arrangements should any of the project companies elects to purchase from these suppliers by entering into a separate definite supply agreement for each project. The Target Group is not subject to any minimum purchase requirement under the framework agreements. During the Track Record Period, the Target Group did not experience any material difficulty in engaging construction contractors or any shortage or delay in the supply of equipment, nor did it experience any material fluctuations in the prices of equipment or building materials.

Customers

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For the details on the sale and purchase contract and the payment terms of customers in respect of properties held for sale, please refer to the paragraph headed “Project development process – Completion and delivery – Customer payment arrangements” in this section.

The five largest customers of the Target Group accounted for approximately 5.5%, 0.7%, 1.4% and 7.2%, respectively, of its total revenue for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively, and were all Independent Third Parties. During the Track Record Period, sales to the largest customer of the Target Group accounted for approximately 3.3%, 0.2%, 0.4% and 2.3% respectively of its total revenue for the relevant period.

None of the Directors and their respective associates or any of the Shareholders which, to the knowledge of the Directors, own more than 5% of the Company’s share capital as at the Latest Practicable Date, have any interest in any of the Target Group’s five largest suppliers or customers.

AWARDS AND RECOGNITIONS

During the Track Record Period, members of the Target Group have received recognition from various public sources and bodies in the PRC. The table below sets out some of the major awards received by members of the Target Group:

Year of award Recipient/ Project Honour/Award Awarding Body

2015 Ground Real Estate “2015 China Real Estate Top The China Real Estate 200” (2015中國房地產開發 Association 企業200強) (中國房地產委員會) The China Real Estate Industry Association (中國房地產業協會) China Real Estate Evaluation Centre (中國房地產測評中心) 2013 Jilin Ground Real “The Most Valuable Brand xwhb.net Estate in the Real Estate (新文化網) Industry 2013” (2013年品 New Culture Daily 牌價值房地產企業) (新文化報社) Huashang Media Group (華商傳媒集團) The Alliance of Chinese Mainstream Media (中國主流媒體聯盟)

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Year of award Recipient/ Project Honour/Award Awarding Body

2012 Jilin Ground Real “Outstanding Enterprises in Jilin City Development Estate Real Estate Development Centre in Jilin City 2012” (吉林市城市開發中心) (吉林市2012年房地產開發優秀企業) 2011 Jilin Ground Real “Top Hundred Private The Steering Group on the Estate Enterprise” Economic Development (「百強民營企業」) Promotion of the Development of Private Enterprise Association in Jilin Province (吉林省促進民營經濟騰飛工作領導小組) 2011 Jilin Ground Real “Outstanding Enterprise for Jilin Municipal Commission Estate Driving Development” of Urban-Rural (突出貢獻開發企業) Development (吉林市城鄉建設委員會) 2010 Jilin Ground Real “Top Hundred Private The People’s Government of Estate Enterprise” Jilin Province (「百強民營企業」) (吉林省人民政府) 2010 Jilin Ground Real “The Most Influential Brand “Jilin Overall Real Estate Estate of Real Property Enterprise Evaluation of the PRC” in 2010” (中國房地產總評榜吉林 (2010年度最具影響力品牌房分榜) 地產企業) 2010 Guangze•Amethyst “Driven Property 2010” (2010 “China Real Estate Business” City 年推動力樓) (房地產報) (廣澤‧紫晶城) 2010 Guangze•Amethyst “Top 10 Residential Value “China Real Estate Business” City Property” (十大居住價值樓 (房地產報) (廣澤‧紫晶城) 盤) 2010 Guangze•Amethyst “Real Estate Developers’ “China Real Estate Annual City Reputation Ranking – Top Overall Rating – Jilin” (廣澤‧紫晶城) Selling Property of the Year (中國房地產總評榜吉林 2010” (2010年房地產口碑榜分榜) 年度熱銷樓盤) 2010 Guangze•Amethyst “Real Estate Developers’ “China Real Estate Annual City Reputation Ranking – Overall Rating – Jilin” (廣澤‧紫晶城) Green Residential-Friendly (中國房地產總評榜吉林 Property 2010” (2010年房地分榜) 產口碑榜綠色宜居樓盤)

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COMPETITION

The Target Group operates in a highly fragmented and competitive property development industry in the PRC. From time to time, the Target Group encounters intense competition from other property developers on all fronts including competition in bidding for land at locations which the management of the Target Group believes to be suitable, product quality, product diversity, pricing, brand recognition, financial resources and so forth. The existing and potential competitors of the Target Group include major domestic property developers in the PRC who develop and operate property projects in nearby locations. For instance, the property projects of the Target Group in Yanji City and Changbaishan face competition from the projects developed by another renowned domestic property developer which is also listed on the Stock Exchange.

During the Track Record Period, the Target Group faced competition among property developers for land available for development in Jilin Province of the PRC. The PRC government has implemented a series of policies to control the excessive growth and curtail speculations in the property development sector in the PRC which has intensified competition for land. The Target Group believes that in view of the limited supply of developable sites at locations which the management of the Target Group believes to be suitable, one of the major barriers for potential competitors in the industry would be access to land banks in prime and accessible locations with investment value. In Jilin Province of the PRC, entry barriers for potential competitors include limited knowledge of local property market conditions, limited brand recognition and availability of financial resources.

Nonetheless, the Target Group remains optimistic for the growth potential of the property development market in Jilin Province and the real estate industry in the PRC on a whole. The Directors also believe that with the experience in developing and offering diverse property products, the Enlarged Group is well-positioned to face up to the challenges and competitions from other market players.

Please refer to the section headed “Industry Overview” set out in Appendix I to this circular for more details on the real estate industry in Jilin Province of the PRC and the PRC. The Enlarged Group may also not be able to compete effectively in the real estate industry in the PRC. Please refer to the section headed “Risks relating to the business of the Enlarged Group – The Enlarged Group faces intense competition from other real estate developers in the PRC” in the section “Risk Factors” in this circular for details.

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INSURANCE

There are no mandatory provisions under the relevant PRC laws, regulations or rules which require a property developer to take out insurance policies for its property development operations. The construction contractors bear primary liability for personal injuries arising out of its construction work. The State Administration of Work Safety (國家安全生產監督管理總局) requires each construction contractor to purchase work-related injury insurance for their construction workers. As the Target Group engages third-party contractors to carry out construction, it does not maintain any such insurance, save and except construction all risks insurance (建築工程一切險), but usually requires the construction contractors to purchase insurance for its project under development. For the investment property held by the Target Group for leasing, namely Guangze International Shopping Centre, the Target Group maintains public liability insurance, property all-risks insurance and cash insurance. During the Track Record Period and up to the date of the Latest Practicable Date, the Target Group did not experience any material damage to its property nor was any material personal injury related claim brought against the Target Group.

During the Track Record Period, the Target Group did not maintain insurance policies for properties that have been delivered to customers as the property management company of the project maintained property management liability insurance for common areas and amenities of these properties. The Target Group also did not have insurance coverage against certain types of losses, such as losses due to natural disasters, war and civil disorder, which are currently uninsurable in the PRC. During the Track Record Period and up to the date of the Latest Practicable Date, the Target Group did not experience any material damage to its property nor was any material personal injury related claim brought against the Target Group.

The Directors are of the view that the existing insurance coverage maintained by the Target Group is in line with market practice of property developers and is adequate for the operations of the Target Group. Nevertheless, the Target Group may not have sufficient insurance coverage for all types of losses, damages or liabilities that may arise in the course of its business operations. Please refer to the section headed “Risks relating to the business of the Enlarged Group – The Enlarged Group may be exposed to certain risks that are not covered by its insurance and any resultant loss may affect the Enlarged Group’s operations, financial condition and prospects” in the section “Risk Factors” in this circular for further details.

INTELLECTUAL PROPERTY

During the Track Record Period, the Target Group has registered a trademark “ ” in the PRC. It is expected that such trademark will continue to be used by the Enlarged Group after Completion. For details of the trademark, please refer to the section ‘‘Statutory and General Information – Further information about the Target Group – Intellectual property rights of the Enlarged Group – Registered Trademarks owned by the Target Company’’ in this circular. As at the Latest Practicable Date, the Target Group was not aware of any material infringement (i) by it of any intellectual property rights owned by third parties or any related infringement claims; or (ii) by any third parties of any intellectual property rights owned by it.

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RISK MANAGEMENT

As a PRC property developer, the Target Group faces operational risks such as changes in PRC political and economic conditions, changes in the PRC regulatory environment, availability of suitable land sites for development at reasonable prices, availability of financing, ability to complete its property development on time and substantial quality of work delivered by third party contractors and so on. Please refer to the section “Risk Factors” in this circular for a discussion of various risks and uncertainties entailed.

The Target Group has established a set of risk management policies and measures to identify, categorise, evaluate and manage risks arising from its business operations. The Target Group generally categorises risks as follows:

• strategy risks; • operational risks; • environmental risks; • financial risks; • legal and compliance risks; • human resources risks; and • information technology risks.

The major features of the risk management policies include the following:

• the board of directors of Ground Real Estate Group is responsible for supervising and monitoring the implementation of risk management measures. The board shall also adopt the risk management measures, which is compiled and updated by the management level, at least on an annual basis; and

• the management level of the Target Group (comprising the general manager, finance manager, administrative manager and business manager at the headquarters) shall be responsible for ensuring the risk management and internal control measures have been carried out at different aspects and submit evaluation report to the board of directors of the Target Group.

To better assist the Board in deciding the Enlarged Group’s risk level and risk appetite and ensuring the soundness and effectiveness of the Enlarged Group’s internal control system, it is the current intention of the Company that a risk management committee shall be established upon Completion.

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HEALTH AND SAFETY AND ENVIRONMENTAL MATTERS

The Target Group is subject to the PRC laws and regulations regarding labour, health and safety, insurance and protection of the environment. To ensure compliance with these laws and regulations, the Target Group has internal policies and systems in place, including a safety and environmental management system which sets out steps and mechanisms dealing with safety and environmental issues at specific stages of operations from signing of construction contracts, the carrying out of construction works to quality inspection and completion and delivery. Specific measures implemented by the Target Group to promote social responsibilities, occupational health and safety and environmental protection are detailed below.

Occupational health and safety

Pursuant to the relevant laws and regulations in the PRC, the Target Group is required to make contributions to mandatory social security funds for basic medical insurance, pension insurance, unemployment insurance, maternity insurance and personal injury insurance as well as to housing funds for its employees.

Further, the employee’s staff manual of the Target Group contains internal policies and procedures regarding occupational health and safety matters. The Target Group has formulated internal policies in ensuring construction safety at various stages of a project development, including the procedures for handling and reporting of accidents. Under the construction contracts entered into by the Target Group and the construction contractors, the construction contractors are responsible for health and safety of the construction workers in the construction sites. The construction contractors are also obliged to keep records of accidents and follow established reporting lines to promptly notify the property management department (項目管理部) of the Target Group of accidents.

During the Track Record Period and up to the Latest Practicable Date, the Target Group had been in compliance with the applicable PRC labour and safety regulations in all material respects and there was no incident or complaint that had a material adverse effect on its operations. During the Track Record Period and up to the Latest Practicable Date, there had been no major accident that had resulted in the death or serious injury of any employee of the Target Group and no claim for personal or property damages or compensation had been received by the Target Group. The PRC legal advisers to the Company have advised that, during the Track Record Period, no material violation of currently applicable PRC labour and safety regulations nor any material employee safety issues involving the Target Group was found. During the Track Record Period, no fines or penalties for non-compliance of PRC labour and safety laws and regulations in material respects were imposed on the Target Group.

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Environmental matters

Property developers in China are subject to a number of PRC environmental laws and regulations including the Environment Protection Law of the PRC《 ( Prevention and Control of Noise Pollution Law of the PRC《中華人民共和國環境保護法》 ( ), the《中華人民 ( 共和國環境噪聲污染防治法》), the Environmental Impact Assessment Law《中華人民共和 ( 國環境影響評價法》) and Administrative Regulations on Environmental Protection for Development Projects《建設項目環境保護條例》 ( ). Please refer to the section headed “Regulatory Overview” set out in Appendix II to this circular for further details. Specific environmental laws and regulations which apply to the Target Group would vary from project to project depending on various factors. Pursuant to these PRC laws and regulations, each property development project is required to undergo environmental impact assessments. Environmental impact assessments and studies are conducted by the Target Group prior to the launch of a project by the Target Group for the purpose of identifying potential sources of pollution and eliminating any potential adverse environmental impact and risk, and to ensure compliance with relevant environmental laws and regulations at the outset. An environmental impact assessment report shall be submitted by the property developer before the relevant authority grants a permit for commencement of construction work on the property development. As advised by the PRC legal advisers to the Company, the project companies in the Target Group have secured the necessary environmental assessment report for all of their property projects during the Track Record Period and up to the Latest Practicable Date in accordance with the relevant PRC laws and regulations. In addition, during the completion acceptance procedures, only projects which have passed the environmental compliance examination can be delivered to the purchaser. For the three years ended 31 December 2012, 2013 and 2014 and eight months ended 31 August 2015, the Target Group incurred environmental compliance costs of approximately RMB275,000, RMB55,000, RMB364,100 and RMB24,000 respectively. The Target Group expects it will continue to incur environmental compliance costs at a similar level, assuming no material changes in the applicable environmental laws and regulations.

The PRC legal advisers to the Company have advised that, during the Track Record Period and up to the Latest Practicable Date, the property projects of the Target Group had been in compliance with the applicable PRC environmental laws and regulations in all material respects and no fines or penalties for non-compliance of PRC environmental laws and regulations were imposed on any member of the Target Group. As advised by the PRC legal advisers to the Company, members of the Target Group are in compliance in all material respects with applicable environmental laws and regulations in China and they have obtained all relevant permits and environmental approvals, in connection with the environment protection, for their property projects.

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EMPLOYEES

As at the Latest Practicable Date, the Target Group had approximately 484 employees. A breakdown of the Target Group’s employees by function is set out below:

Number of Function employees

Central management 16 Strategic planning 3 Project manager 7 Project development 11 Construction management 23 Cost management 17 Accounting and finance 49 Procurement 7 Design 11 Sales and marketing 40 Customer services 62 Human resources 13 Property management 215 General administration & information 9 Travel services 1

Total 484

A breakdown of the Target Group’s employees by geographical location is set out below:

Number of Geographical location employees

Jilin City, Jilin Province 179 Yanji City, Jilin Province 40 Fusong County, Jilin Province 39 Baishan City, Jilin Province 175 Changchun City, Jilin Province 51

Total 484

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The remuneration package of the employees of the Target Group includes basic salaries, discretionary bonuses, housing and other allowances and retirement benefit scheme contributions. The total amount of employee remuneration of the Target Group for each of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 amounted to approximately RMB30.0 million, RMB35.4 million, RMB40.0 million and RMB33.3 million respectively.

The remunerations (including salaries, bonuses, allowances and benefits in kind and pension scheme contribution) of the Target Group’s five highest paid employees (including the director of the Target Group) by the Target Group in aggregate for the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 amounted to approximately RMB1.5 million, RMB1.4 million, RMB2.0 million and RMB2.2 million, respectively. No other payments or remuneration to the five highest paid employees as an inducement to join or upon joining the Target Group or as a compensation for loss of office have been paid or are payable, or any benefits in kind granted, in respect of the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015, by the Target Group.

The Target Group designs and provides in-house training to its employees at different levels, targeting employees of different seniorities and at different stages of their career. These training programmes aim at enhancing the employees’ knowledge and understanding of the corporate culture, system and management structure of the Target Group as well as the property development industry.

The Target Group mainly recruits its employees based on the relevant requirements of the position, the experience and qualifications of the employee and prevailing market conditions at the relevant time. For certain specific positions, headhunters were engaged in the personnel selection process. Pursuant to the service agreement with the headhunters, the headhunters are normally paid on a commission basis with reference to the annual salary of the personnel successfully recruited. Such commissions are typically settled by stages, within a specified period from the commencement of employment of the relevant personnel.

The costs of social insurance and housing funds for the employees recruited are borne by the Target Group. Except as otherwise disclosed in this section, the directors of the Target Group confirm that they are not aware of any breaches of the applicable labour and social welfare laws and regulations in the PRC by the PRC entities comprised in the Target Group in all material respects during the Track Record Period and up to the Latest Practicable Date. The employees do not negotiate their terms of employment through any labour union. During the Track Record Period and as at the Latest Practicable Date, so far as the Target Group is aware, there had been no material labour disputes or labour related legal proceedings against the Target Group.

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LEGAL PROCEEDINGS AND COMPLIANCE

Civil Air Defense Property

According to applicable PRC laws and regulations, new buildings in cities should contain certain basement areas which may be used for civil air defense purposes in times of war. As at 30 November 2015, a GFA of 28,154.91 sq.m. under development would be designated as civil air defense areas, the design planning proposal of which has been approved by the civil air defence authorities of the PRC government.

Approved/ planned GFA of civil air Usage/ Category of Location of the civil air defense intended properties defense projects projects usage accounted for (sq.m.)

Guangze • Amethyst 1,967.18 Car park completed property City Phase II properties held for sale Guangze • Tudors Palace 4,000.00 Car park property under development Guangze China House 9,526.59 Car park property under development Guangze International 8,200.00 Car park property under Shopping Centre development Guangze Red House 4,461.14 Car park property under development

Total 28,154.91

These civil air defense areas are accounted for as “property under development’’ or “completed properties held for sale” and are not individually stated in the financial statements of the Target Group and their carrying amount is nil. Subject to obtaining the permit for use of civil air defense areas in peace time (人防工程平時使用證) upon completion of construction, these civil air defense areas are intended to be used primarily as car parking spaces in peace time. These civil air defense car parking spaces are ancillary facilities to their respective property projects. In accordance with the applicable PRC civil air defense laws and regulations, investors in civil air defense are permitted to use (including lease), manage the civil air defense property in time of peace and profit therefrom. The Enlarged Group will comply with the applicable PRC civil air defense laws and regulations and the permit for use of civil air defence areas in peace time in all material aspects when using the civil defence areas upon the completion of construction. The PRC legal adviser to the Company has advised that the civil air defense properties as planned, constructed and/or developed by the Target Group are in compliance with the relevant PRC laws and regulations. Upon the completion of the construction of civil air defense properties by the Target Group and obtaining the permits of use of civil air defense areas in peace time or the written confirmations from the competent authorities as approved and issued by relevant authorities, the civil air defense properties can be leased or used in the manner within the authorised scope of such permits and the relevant PRC laws and regulations.

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Legal proceedings

The Target Group may be subject to legal or arbitration proceedings in its ordinary course of business as a property developer in the PRC. During the Track Record Period and up to the Latest Practicable Date, no member of the Target Group had been engaged in any litigation, arbitration or claim of material importance, and no such litigation, arbitration or claim of material importance is pending or threatened by or against the Target Group that would have a material adverse impact on the Target Group’s business, operations and prospects.

Licenses and Certificates

During the Track Record Period and as at the Latest Practicable Date, members of the Target Group have obtained all the necessary permits, licences, certificates and approvals that are material to its business operations. The table below sets forth the details of the real property developer qualification certificates (房地產開發企業資質證書) and property management enterprise certificates (物業服務企業資質證書) obtained by the members of the Target Group which are in effect as at the Latest Practicable Date:

Member of the Target Group Qualification Expiry date

Jilin Zhujia Interim Qualification Certificate for Real 28 February 2016 Property Development Enterprise (房地產開發企業暫定資質證書) Jilin Ground Real Qualification Certificate for Real 7 June 2017 Estate Property Development Enterprise (房地產開發企業資質證書) Baishan Ground Interim Qualification Certificate for Real 10 June 2016 Real Estate Property Development Enterprise (房地產開發企業暫定資質證書) Yanji Huize Interim Qualification Certificate for Real 29 October 2016 Property Development Enterprise (房地產開發企業暫定資質證書) Fusong Ground Interim Qualification Certificate for Real 9 March 2016 Property Development Enterprise (房地產開發企業暫定資質證書) Jilin Ground Qualification Certificate for Property 12 June 2017 Property Management Enterprises Services (物業服務企業資質證書)

Compliance

As at the Latest Practicable Date, save as disclosed below, as advised by the PRC legal advisers to the Company, the Target Group had been in compliance with the applicable laws and regulations in the PRC relating to its business operations in all material respects during the Track Record Period.

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So far as the Company is aware, there are no pending or threatened actions against the Target Group by any regulatory authority in the PRC that are material to its business operations and the Target Group is not currently subject to any penalty imposed by the relevant PRC authorities that are material to its business operations.

During the Track Record Period, the Target Group had failed to comply with certain applicable laws and regulations in the PRC, a summary of the material non-compliance of the Target Group is set out as follows:

Historical Non-compliance Incidents

Non-compliance incidents (i) Reason(s) for the Legal consequences, potential and the relevant entity/ non-compliance; and (ii) maximum penalties and other Rectification actions taken property project responsible person involved financial liabilities and current status

1. Failure to place the pre-sale proceeds into designated custodial accounts

Two members of the Target Group, (i) The Target Group had As advised by the PRC Legal No penalty was ordered namely Yanji Huize and Baishan entered into agreements Advisers to the Company, against the Target Group. Ground Real Estate, failed to with banks in Baishan pursuant to the Measures for The Target Group has deposit the proceeds generated from City and Yanji City to set Administration of Pre-sale of received confirmation from the pre-sales of Guangze Red up custodial accounts Commodity Properties《城市商品 ( the competent authorities House, Guangze International into which the pre-sale 房預售管理辦法》) and according to confirming they will not Shopping Centre and Guangze proceeds should be the materials and confirmations impose any penalty on this China House into the designated placed. However, the provided by the Target Group, non-compliance incident. custodial accounts in accordance the responsible personnel Yanji Huize and Baishan Ground relevant PRC laws and regulations wrongly believed that as Real Estate are subject to a The Target Group has and the agreements with the long as the pre-sale maximum fine of RMB30,000 for strengthened its internal relevant regulatory authorities. proceeds are used solely mishandling the pre-sale control policy regarding the for the construction of proceeds. pre-sale proceeds. Please The amount of pre-sale proceeds the relevant property refer to the section headed that has not been deposited into projects, there was no During the Track Record Period “— internal control measures designated custodial accounts are as need to deposit the and up to the Latest Practicable to ensure future compliance” follows: pre-sale proceeds into Date, the Target Group had not in this section for further designated custodial been subject to any order or details. (i) Guangze Red House: accounts. The directors of penalty and no action has been RMB16.4 million for the the Target Group confirm taken by the governmental The Target Group has period from May 2015 to that all the proceeds from authorities in relation to this designated the associate vice June 2015; pre-sales have been used non-compliance incident. president (助理副總裁)atits solely for the headquarters to be (ii) Guangze International construction of the responsible for supervising Shopping Centre: RMB285.0 relevant property the implementation of the million for the period from projects as at the Latest measures regarding the use October 2013 to October Practicable Date. and deposits of the pre-sale 2014; and proceeds at project company (ii) The finance manager of level. (iii) Guangze China House: each of Yanji Huize and RMB5.1 million for the Baishan Ground Real period from January 2015 to Estate. They have left June 2015. employment with the Target Group in September 2014 and July 2015, respectively.

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Yanji City Housing Management Centre (延吉市房產管理中心) issued confirmation dated 18 August 2015 and Baishan City Indemnificatory Housing Management Centre (白山市保障性住房管理中心) issued confirmations dated 29 June 2015 respectively confirming that (i) they acknowledge the non-compliance incidents; and (ii) they will not impose any penalties in respect of the historical non-compliance incidents.

The PRC Legal Advisers to the Company is of the view that (i) those relevant regulatory authorities are competent authorities to issue the above confirmations; and (ii) based on such confirmations, the likelihood that Yanji Huize and Baishan Ground Real Estate will be required to pay further penalties by such authorities is low.

As such, the Target Group did not make any provision for such non-compliance incident.

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2. Unauthoised occupation of land and commencement of construction works before obtaining the construction work commencement permits

In 2013, Jilin Zhujia occupied a land (i) To cooperate with the Regarding this non-compliance The Target Group has fully parcel in Jilin Chuanying district redevelopment work of incident, Jilin Ministry of Land settled the penalties imposed with site area of approximately the local government and and Resources (吉林市國土資源局) and received written 2,392 sq.m. and commenced in order to minimise the issued the Decision on confirmation from the construction of resettlement units impact made on the Administrative Penalty《行政處 ( competent authority that no (the “Chuanying Land”) thereon living environment of the 罰決定書》) on 29 August 2014 further penalties will be prior to obtaining the land use surrounding residents ordering Jilin Zhujia to surrender imposed on this rights certificates, construction land and the residents of the the Chuanying Land and pay a non-compliance. planning permits, construction Chuanying Land, Jilin penalty of RMB12,554. The Target work planning permits and Zhujia occupied certain Group has confirmed that Jilin The Target Group has construction work commencement portion of Chuanying Zhujia has surrendered the strengthened its internal permits from the relevant Land and commenced occupied land and fully paid the control policy to ensure the government authorities. construction of penalty. commencement of resettlement units construction of property thereon without As advised by the PRC Legal project upon receipt of the obtaining the requisite Advisers to the Company, relevant permits. Please refer approvals. pursuant to Land Administration to the section headed “– Law of People’s Republic of internal control measures to (ii) The general manager of China《中華人民共和國土地管理 ( ensure future compliance” in Jilin Zhujia. He has left 法》), according to the materials this section for further employment with the and confirmations provided by details. Target Group in February the Target Group. Jilin Zhujia is 2015. subject to a maximum fine of The Target Group has RMB72,000 (calculated at RMB30 designated the associate per sq.m of the area of land president (助理總裁)tobe occupied without authorisation). responsible for supervising the compliance. He has also On 27 July 2015, Jilin Ministry of been provided with relevant Land and Resources confirmed in training. writing that (i) it has issued the aforesaid administrative penalty and Jilin Zhujia has paid the abovementioned penalty on 31 August 2014; and (ii) it will not impose any further penalty regarding the non-compliance incident.

The PRC Legal Advisers to the Company is of the view that (i) Jilin Ministry of Land and Resources is competent authority to issue the above confirmation; and (ii) based on such confirmation, the likelihood that Jilin Zhujia will be required to pay any penalties by such authorities thereto is low.

In view of the (i) advice from PRC Legal Advisers to the Company, (ii) that the penalty has been settled and (iii) the confirmation received, the Target Group did not make any provision for such non-compliance.

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3. Commencement of pre-sale before obtaining the pre-sale permit

Relating to the occupation of the (i) As part of the relocation Regarding this non-compliance As at the Latest Practicable Chuanying as mentioned in item 2 plan for the residents of incident, Jilin City Housing Date, the Target Group has above, Jilin Zhujia entered into the expropriated area Security and Real Estate (i) fully settled the provisional pre-sale agreements and the surroundings, Management Bureau (吉林住房保 compensation imposed with certain residents (“Original Jilin Zhujia commenced 障和房地產管理局) issued the pursuant to the provisional Purchasers”) of the expropriated the pre-sales without Decision on Administrative pre-sale agreement and area and the surroundings for the obtaining the pre-sale Penalty《行政處罰決定書》 ( )on27 repaid to the Original sales of Chuanying Land and permits. August 2014 ordering Jilin Zhujia Purchasers the deposits received related deposits between to stop the pre-sales immediately received and (ii) settled the September 2013 and April 2014 (ii) The general manager of and pay a penalty of RMB58,000. penalties imposed by the before it obtained the relevant Jilin Zhujia. He has left The Target Group has stopped the government authority. The pre-sale permit. employment with the pre-sales and fully paid the Target Group also received Target Group in February penalty, as well as repaid all written confirmation from The Target Group has received a 2015 deposits received to the Original the competent authority that total of RMB50.4 million in respect Purchasers. no further penalties will be of the pre-sales of Chuanying Land. imposed on this As advised by the PRC Legal non-compliance incident. Advisers to the Company, pursuant to Administrative The Target Group has Regulations on Urban Real Estate strengthened its internal Development and Operation《城 ( control policy to ensure the 市房地產開發經營管理條例》), Jilin commencement of pre-sales Zhujia is subject to a fine of up to of property project upon 1% of the total amount of the receipt of the relevant pre-sales proceeds and the permits. Please refer to the pre-sales proceeds may be section headed “— internal confiscated by the relevant control measures to ensure authority. According to the future compliance” in this materials and confirmations section for further details. provided by the Target Group, Jilin Zhujia received deposits in The Target Group has the amount of RMB50.4 million designated the associate for the pre-sales of Chuanying president (助理總裁)tobe Land. Accordingly, the maximum responsible for supervising fine is RMB504,000. the compliance. He has also been provided with relevant On 30 July 2015, Jilin City training. Housing Security and Real Estate Management Bureau has confirmed in writing that (i) the aforesaid penalty has been paid on 24 October 2014; and (ii) it will not impose any further penalty regarding the non-compliance incident.

The PRC Legal Advisers to the Company is of the view that (i) Jilin City Housing Security and Real Estate Management Bureau is competent authority to issue the above confirmation and (ii) based on such confirmation, the likelihood that Jilin Zhujia will be required to pay further penalties by such authorities is low.

In view of (i) the advice from PRC Legal Advisers to the Company, (ii) that the Target Group has repaid the outstanding contributions and (iii) the confirmation received, the Target Group did not make any provision for such non-compliance.

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4. Failure to make adequate social security insurance and housing provident fund

Jilin Ground Real Estate, Jilin (i) This was because some As advised by the PRC Legal The Target Group has Ground Property Services, Yanji employees of the Advisers to the Company, confirmed with the Huize, Fusong Ground, Jilin Relevant Subsidiaries according to the Social Insurance competent authorities the Ground Property Services (Baishan), determined to make Law of the People‘s Republic of outstanding contributions Baishan Ground Business social security insurance China《中華人民共和國社會保險 ( amount and duly repaid the Management, Baishan Ground Real and housing provident 法》), the Target Group may be outstanding contributions. Estate (the “Relevant fund contributions ordered to pay all the outstanding The Target Group has also Subsidiaries”) failed to make payable by individuals social insurance contributions for received written adequate social security insurance based on the local the relevant employees, a daily confirmations from the and housing provident fund minimum wage standard default fine of 0.05% and a fine competent authorities that no contributions for their respective accepted by local equivalent to one to three times of further penalties will be employees as required by relevant authority, instead of their the outstanding amount if such imposed on the this PRC laws and regulations. actual income. payment is not made within the non-compliance incident. prescribed time limit prescribed The total outstanding social (ii) The deputy general by the relevant social insurance The Target Group has revised insurance and housing provident manager of the human contribution collection institution. its internal control policy fund contributions as set out in the resources and regarding social security confirmations from the relevant administrative centre of Further, as advised by the PRC insurance and housing government authorities during the the Target Group. She left Legal Advisers to the Company, provident fund contributions Track Record Period is the employment of the according to the Administrative to be made by its PRC approximately RMB4.07 million. Target Group in June Regulations on the Housing subsidiaries. Please refer to 2015. Provident Fund《住房公積金管理 ( the section headed “– 條例》), failure in opening internal control measures to accounts for employees’ housing ensure future compliance” in provident fund contributions and this circular for further registering contributions details. payments may give rise to maximum fine of RMB50,000. The The relevant staffs in the housing provident fund human resources department management centre shall order have also undergone training the company that is overdue in session provided by the the payment and deposit of, or Target Group on 15 August underpays the housing provident 2015. The Target Group has fund to make the payment and further designated the deposit within a prescribed time manager in the finance limit, failing which the housing department to monitor the provident fund management compliance with the PRC centre may make an application to laws and regulations on the court to enforce measures social security insurance and against such company in order to housing provident fund collect the outstanding housing contributions. provident fund contributions.

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During the Track Record Period and up to the Latest Practicable Date, the Target Group had not been subject to any order or penalty and no action has been taken by the governmental authorities in relation to social security insurance, housing provident fund nor the Target Group is aware of any employees complaints or demands for payment of previously unpaid social security insurance or housing provident fund.

During the period from 30 July 2015 to 12 August 2015, each of the Relevant Subsidiaries received written confirmations from the relevant regulatory authorities that (i) the Relevant Subsidiaries have duly paid the outstanding contributions; (ii) they will not impose any penalty for the historical non-compliances; and (iii) they do not have any records of outstanding payments of social security insurance, housing provident fund in relation to social security insurance, housing provident fund as at the date of confirmations.

The PRC Legal Advisers to the Company is of the view that (i) those relevant regulatory authorities are competent authorities to issue the above confirmations and (ii) based on such confirmations, the likelihood that the Relevant Subsidiaries will be required to pay any penalties by such authorities thereto is low.

In view of (i) the advice from PRC Legal Advisers to the Company, (ii) that the Target Group had repaid the outstanding contributions and (iii) the confirmation received, the Target Group did not make further provision for such non-compliance incidents.

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5. Delivery of property units of Guangze•Amethyst City Phase I and Phase II and Guangze International Shopping Centre prior to obtaining completion certificates

Two members of the Target Group, (i) In relation to Pursuant to the Administrative No penalty was ordered Jilin Ground Real Estate and Guangze•Amethyst City Regulations on the Quality against the Target Group. Baishan Ground Real Estate Phase I and Phase II: Management of Construction The Target Group has delivered property units of Engineering《建設工程質量管理條 ( received confirmations from Guangze•Amethyst City Phase I In full consideration of 例》) and the Administrative the competent authorities and II and Guangze International the urgency of relocating Regulations on the Quality confirming they will not Shopping Centre to purchasers prior 1,326 households and the Management of Construction impose any penalty on this to obtaining the relevant completion time limitation on the Engineering of Jilin City《吉林市 ( non-compliance. certificates. delivery of the property 建設工程質量管理條例》) and units, Jilin Municipal according to the materials and The completion certificates of The total GFA of property units that Commission of confirmations provided by the Guangze • Amethyst City have been delivered prior to Urban-Rural Target Group, Jilin Ground Real Phase I and Phase II were obtaining the relevant completion Development (吉林市城鄉 Estate and Baishan Ground Real obtained in April 2013 and certificates are as follows: 建設委員會) approved Estate are subject to a fine of November 2015, respectively. Jilin Ground Real Estate between 2% and 4% of the (i) Guangze•Amethyst City of delivering the contractual price for the The completion certificates of Phase I: property units pursuant construction projects in question, Guangze International to obtaining the respectively and the maximum Shopping Centre were 178,699.47 sq.m for the construction work amount of penalty is obtained in 25 December period from January 2012 to completion inspection approximately RMB38.3 million. 2015. April 2013. report (竣工工程驗收報告). During the Track Record Period The Target Group has (ii) Guangze•Amethyst City and up to the Latest Practicable strengthened its internal Phase II: In relation to Guangze Date, the Target Group had not control policy regarding the International Shopping been subject to any order or delivery of property units. 323,284.51 sq.m for the Centre: penalty and no action has been Please refer to the section period from July 2013 to taken by the governmental headed “– internal control November 2015. Due to the delay of land authorities in relation to this measures to ensure future expropriation of the non-compliance incident. compliance” in this section (iii) Guangze International property project, Baishan for further details. Shopping Centre: Municipal Commission On 26 November 2015, Jilin of Housing and Municipal Commission of The Target Group has 148,686 sq.m for the period Urban-Rural Urban-Rural Development (吉林市 designated the associate from January 2015 to Development (白山市住房城鄉建設委員會) confirmed in president (助理總裁)atits December 2015. 和城鄉建設局) has been writing that it will not impose any headquarters to be unable to issue penalty in respect of these responsible for supervising completion certificates in non-compliance incidents in the implementation of the a timely manner. relation to Guangze•Amethyst measures regarding the City Phase I and Phase II. delivery of property units at The directors of the project company level. Target Group confirm On 17 November 2015, Baishan that the Target Group Municipal Commission of will no longer deliver Housing and Urban-Rural property units to Development (白山市住房和城鄉建 purchasers prior to 設局) confirmed in writing that it obtaining the completion will not impose any penalty in certificates. respect of these non-compliance incidents in relation to Guangze International Shopping Centre.

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(ii) The project manager of The PRC Legal Advisers to the each of Jilin Ground Real Company is of the view that (i) Estate and Baishan those relevant regulatory Ground Real Estate. They authorities are competent have left employment authorities to issue the above with the Target Group in confirmations; and (ii) based on February 2015 and May the confirmations received, the 2015, respectively. likelihood that Jilin Ground Real Estate and Baishan Ground Real Estate will be required to pay penalties by such authorities thereto is low.

In view of the (i) advice from PRC Legal Advisers to the Company and (ii) confirmations received, the Target Group did not make any provision for such non-compliance.

Save as disclosed above, the Target Group had complied in all material respects with the relevant PRC laws and regulations in relation to its business operations as during the Track Record Period and up to the Latest Practicable Date.

Internal control measures to ensure future compliance

In order to improve the Enlarged Group’s internal control and corporate governance, and to prevent recurrence of non-compliance in the future, the Group and/or the Target Group have adopted or will adopt certain internal control and corporate governance measures, the implementation of which will be supervised by the senior management of the Enlarged Group. In particular, measures set out in paragraphs 1 to 3 below had been adopted by the Group and/or the Target Group as at the Latest Practicable Date and measures set out in paragraphs 4 to 7 below will be adopted with effect from Completion. Please see below for further information on these internal control and corporate governance measures:

(1) Mr. Wang Guanghui and Mr. Huang Bingxing, executive Directors of the Company will be responsible for supervising the implementation of the internal control and corporate governance measures of the Enlarged Group. Please refer to the section headed “Directors and Senior Management of the Enlarged Group” in this circular for details of their respective experience and qualifications. Mr. Wang Guanghui and Mr. Huang Bingxing will follow the requirements on internal control as set out in the Corporate Governance Code in Appendix 14 to the Listing Rules and report to the Board;

(2) the Target Group has updated and formalised its internal financial reporting manual for record keeping and accounting, its operation system and work flow manuals covering relevant business segments – property development, sales and leasing which set out, amongst others, division of responsibilities

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among departments, management principles, detailed work flows reporting and approval procedures as well as management standards applicable to each business segment;

(3) the Target Group has adopted an internal code of conduct for the employees which sets out the protocols and policies on corporate values, anti-corruption principles, corporate governance, criteria for decision-making and disciplines and behaviours, which all employees are required to strictly follow;

(4) the Audit Committee of the Company with written terms of reference in accordance with Appendix 14 to the Listing Rules will review the internal control systems and procedures for continuing compliance with the requirements of the Listing Rules;

(5) the Enlarged Group will continue to provide training to its employees to raise their awareness of the importance of internal control, corporate governance and legal compliance;

(6) the Company has appointed external Hong Kong legal advisers to advise it on compliance with the Listing Rules and the applicable Hong Kong laws and regulations; and

(7) the Company has appointed Octal Capital Limited with effect from Completion as its compliance adviser upon Completion to advise the Enlarged Group on compliance matters in accordance with Rule 3A.19 of the Listing Rules.

Enhancement of internal control system

The Target Group had, in view of the recommendations from the Internal Control Consultant, enhanced its internal control by implementing the following measures by the Latest Practicable Date:

• documenting and incorporating the corporate governance policies into the manual of organisational management system (組織管理制度) and requiring all the staff to abide by these policies;

• safeguarding against unnecessary intervention of or attempts to override the internal control system by the management of the Target Group by adopting the policies for the purpose of prohibiting such intervention or attempts and encouraging the staff to take part in overseeing the system;

• improving the system in respect of tax calculation and recording by requiring that the relevant supporting documents be properly retained and filed and by engaging designated officers to specifically handle tax related matters and ensure proper record keeping;

• setting up a risk management committee and establishing a comprehensive set of risk management policies and procedures for the purpose of identifying and assessing risks and conducting risk analysis so as to determine the proper course of action in respect of a particular risk;

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• documenting the anti-fraud and anti-bribery policies including the code of conduct and reporting and whistle-blowing system;

• laying down the set of procedures whereby designated officers are instructed to ensure proper record keeping in respect of each property development project of the Target Group and monitor the obtaining of the requisite permits, certificates and approvals at different stages of property development;

• requiring all fund transfers at banks, online banking transactions and issuance of cheques be properly authorised and documented; and

• putting in place the system whereby observance of the restrictive financial ratio clauses (財務指標約束條款) set out in the banking facilities documents and loan agreements of the Target Group be checked and examined on a monthly basis.

Internal Control Consultant’s Review

The Company engaged an independent internal control consultant (the “Internal Control Consultant”) in December 2014 to perform an overall assessment on certain procedures, systems and internal controls of the Target Group.

During the internal control review, the Internal Control Consultant has identified internal control deficiencies and provided recommendations for management’s consideration to enhance and rectify those deficiencies including material weakness that led to the historical non-compliance as disclosed in this section. The Target Group has been implementing remedial measures accordingly and the Directors confirm that all internal control deficiencies that were considered material have been rectified. The Internal Control Consultant has reviewed the remedial status. Based on the result of the review, it is noted that the material weakness identified under the scope of review was addressed.

Joint Sponsors’ View

During the Joint Sponsors’ due diligence process and having taken into account the following matters as confirmed by the Directors, nothing has come to the attention of the Joint Sponsors that would cause it to believe that the internal control of the Target Group is inadequate and insufficient under the Listing Rules to prevent the occurrence of the above non-compliance incidents in the future:

• having considered the reasons for each of the historical non-compliance incidents, the remedial actions taken and the enhanced internal control measures set out in this section above;

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• having reviewed the internal control procedures the Target Group prepared and the relevant supporting documents collected from the Group;

• having discussed with the senior management of the Target Group on the findings and recommendations concerning the internal control system by the Internal Control Consultant;

• having been given to understand that as disclosed in the paragraph headed “Internal Control Consultant’s Review” in this section, (i) the Target Group had established the internal control policies according to the recommendations of the Internal Control Consultant, and put in place internal control measures, both at the headquarters and project company level, which have been implementing on an ongoing basis, to rectify the deficiencies identified under the scope of the review; (ii) no further material weakness has been noted under the scope of review; and (iii) the Target Group believes that its internal control measures that are currently in place are adequate and effective;

• having considered the confirmations obtained from relevant governmental authorities in relation to the non-compliance incidents set out in this section above;

• having considered the legal opinion from the PRC Legal Adviser to the Company;

• training session been provided to the Directors and senior management by the Hong Kong legal adviser to the Company on ongoing obligations, duties and responsibilities of directors and officers of a listed company in Hong Kong, and the Directors are fully aware of their duties and responsibilities as directors of a listed company in Hong Kong; and

• the Enlarged Group’s access to external professionals, such as the compliance adviser and legal advisers, to seek professional advice on any issues relating to rules, laws and regulations in the PRC and Hong Kong.

In addition, since no dishonesty was involved on the part of the Directors or cast any doubt on their integrity or competence, the Directors are of the view, and the Joint Sponsors concur with their view, that (i) the internal control system and corporate governance practices are adequate and will prevent future non-compliance with the relevant laws and regulations by the Enlarged Group; (ii) there is no material impact on the suitability of the Directors to act as directors of a listed issuer under Rules 3.08 and 3.09 of the Listing Rules; and (iii) there is no material impact on the suitability of the Company for [REDACTED] under Rule 8.04 of the Listing Rules.

Indemnity by controlling Shareholders

Upon Completion, each of the controlling Shareholders will enter into a deed of indemnity pursuant to which each of the controlling Shareholders will agree to indemnify the Enlarged Group on a joint and several basis, against any costs, expenses, claims, liabilities, penalties, losses or damages incurred or suffered by the Enlarged Group arising from any non-compliance of the Target Group disclosed in the paragraph headed “Legal Proceedings and Compliance – Compliance” in this section. The Directors are satisfied that the controlling Shareholders have sufficient financial resources to honour their obligations to provide indemnities in respect of the abovementioned non-compliances against the Enlarged Group under the deed of indemnity.

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CONTROLLING SHAREHOLDERS

As at the Latest Practicable Date, Charm Success held approximately 65% of the issued share capital of the Company. Ms. Cui is the sole shareholder of Charm Success and accordingly, Ms. Cui had an indirect interest in approximately 65% of the issued share capital of the Company. Upon Completion (assuming no Convertible Bonds and Convertible Preference Shares have been converted), Charm Success and Ka Yik will be indirectly interested in approximately [REDACTED] and [REDACTED] of the issued share capital of the Company respectively and Ms. Cui, as the sole legal and beneficial owner of Charm Success and Ka Yik, will in aggregate be indirectly interested in approximately [REDACTED] of the issued share capital of the Company, and accordingly, Ms. Cui and Charm Success will remain as the controlling Shareholders of the Enlarged Group.

COMPETITION

Save as disclosed in this circular, none of the Directors, controlling Shareholders, nor any of their respective close associates is a director or a shareholder of any business apart from the business of the Enlarged Group which competes or is likely to compete, either directly or indirectly, with the business of the Enlarged Group.

Non-Competition Deed

Pursuant to the Deed of Non-Competition to be entered into among the Company, Ms. Cui, and Charm Success on Completion, each of Ms. Cui and Charm Success (each a ”Covenantor”, together, the “Covenantors”) will undertake to the Company (for itself and for the benefits of its subsidiaries) that she/it shall not, and shall procure that her/its associates and entities or companies controlled by her/it or her/its associates not to, either on its own account or for any other person, firm or company, directly or indirectly be interested or involved or engaged in or acquire or hold an interest (in each case whether as a shareholder, partner, agent, consultant, employee or otherwise and whether for profit, reward or otherwise) in any business which competes or is likely to compete, directly or indirectly, with the Enlarged Group’s business of telecommunications retail sales and management services, property investment, property development and management, sale and leasing of residential, commercial and tourism properties as at the date of the Deed of Non-Competition (the “Restricted Activity”).

Each of the Covenantors will also undertake and agree that (a) it shall promptly provide the Company, in writing (by email, facsimile or otherwise) with any relevant information in respect of any new business opportunity (other than certain business opportunities as set out below) which competes or may compete with the Restricted Activity which she/it or her/its associates may have knowledge for the Company to assess such new business opportunity. The Company shall, as soon as practicable upon provision by the Covenantors of such new business opportunities, submit such business opportunities to the independent non-executive Directors of the Company for assessment as to whether the Company would pursue such opportunities. No Covenantor or her/its associates shall pursue such business opportunities until the Company confirms that it will not pursue such business opportunities; (b) she/it shall provide all information

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Pursuant to the Deed of Non-Competition, the undertakings above do not apply to:

(a) Covenantors directly or indirectly engaging or having an interest in or continuing to engage or have an interest in the Restricted Activity if they are so involved through their respective direct or indirect interest in the Enlarged Group; and

(b) Covenantors either directly or indirectly holding or being interested in shares or other securities in any company which is engaged or interested in any Restricted Activity and whose shares or securities are listed on a stock exchange (the “Subject Company”) provided that (1) the aggregate number of shares held by the Covenantors or in which they are interested does not amount to more than 10 per cent. of the issued shares of the Subject Company; (2) the revenue or assets of the Subject Company attributable to the Restricted Activity recorded in the consolidated audited accounts of the latest full financial year immediately before the acquisition is less than 20% of its consolidated total revenue or consolidated total assets (as the case may be); or (3) neither the Covenantors nor any of their respective associates can exercise any control, directly or indirectly, over the board of directors of the Subject Company.

The Deed of Non-Competition and the rights and obligations thereunder are subject to and conditional upon and shall be effective upon Completion. The obligations of the Covenantors under the Deed of Non-Competition cease to be of any force and effect on the earliest of the date on which: (a) the Shares cease to be listed on the Main Board (save for temporary suspension of the Shares due to any reason); and (b) the Covenantors and their associates, individually and/or collectively ceased to be a controlling shareholder (within the meaning of the Listing Rules) of the Company.

According to the Deed of Non-Competition, the Covenantors undertake to and agree and covenant with the Company (for itself and for the benefits of its subsidiaries) to indemnify each member of the Enlarged Group and their respective directors and officers (collectively, the “Indemnified Parties” and individually, an “Indemnified Party”) and keep each of the Indemnified Parties fully and effectively indemnified on a continuing basis and on demand against all actions, claims and proceedings from time to time made against, and all losses and damage suffered and all payments, costs or expenses (except for any loss or damage arisen out of any wilful default, gross negligence, fraud or wilful breach of the terms of the Deed of Non-Competition on the part of the Company) made or incurred by, such Indemnified Party arising out of or in connection with or by reason of any breach or alleged breach on the part of the Covenantors of any of its obligations under or the representations and warranties or other provisions of the Deed of Non-Competition.

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INDEPENDENCE FROM THE CONTROLLING SHAREHOLDERS

Save as disclosed in the section headed “Continuing Connected Transactions” in this circular, the Directors do not expect there to be any significant transactions between the Group and the controlling Shareholders upon the Listing.

The Directors consider that the Group is capable of carrying its business independent of the controlling Shareholders and their respective close associates following the Listing, having taken into consideration the following factors:

(a) Management independence

The Board comprises three executive Directors and three independent non-executive Directors. Save as disclosed in the section headed “Directors and Senior Management of the Enlarged Group” of this circular, there is no other relationship among the Directors.

The Directors are of the view that the Company is capable of maintaining management independence as:

(i) the Group’s strategies, management, operations and affairs are formulated, led, managed and/or supervised by the Board and not by any individual Director. All major and important corporate actions of the Company are and will be fully deliberated and determined by the Board collectively and objectively as a collective body;

(ii) the Company has maintained and will continue to maintain a balanced composition of executive Directors and independent non-executive Directors with diversified expertise and experience, so that a strong independent element is present to effectively exercise independent judgment on the corporate actions of the Company and a sufficient degree of checks and balances among members of the Board can be ensured;

(iii) pursuant to the terms of the service contracts entered into between the Company and the executive Directors, every executive Director is required to devote substantially the whole of his time, attention and abilities during normal business hours and such additional hours as may reasonably be requisite to the Company;

(iv) in the event that there is a potential conflict of interest in or arising out of any transaction to be considered and approved by the Board, the interested Director(s) shall abstain from voting at the relevant meeting of the Board considering and approving such transaction and shall not be counted towards the quorum of such Board meeting unless this is otherwise permitted under the Bye-laws and/or the Listing Rules;

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(v) the Company has three independent non-executive Directors, who are not associated with any of the controlling Shareholders or their respective close associates. Resolutions of the Board approving any matters in which any of the executive Directors has a potential conflict of interest and/or material interest will, for so long as all the executive Directors or their respective associates are also the controlling Shareholders and are relatives of the others, only be considered and approved by the independent non-executive Directors (as under the provisions of the Bye-laws and the Listing Rules, the executive Directors will then be prohibited from voting on the resolution(s) and will not be counted towards the quorum of the relevant Board meetings at which the relevant resolution(s) is/are approved). The independence of the Board’s decisions in respect of any matters in which any of the Group’s executive Directors has a potential conflict of interest and/or material interest is and can be ensured;

(vi) the Company has established corporate governance procedures in safeguarding the interests of the Shareholders and enhancing Shareholders’ value. Each Director is fully aware of his fiduciary duty to the Company, and will abstain from voting on any matter where there is or may be a conflict of interest as required under and in accordance with the applicable Bye-laws and the Listing Rules; and

(vii) the Board from time to time delegates certain functions to, and is assisted by its senior management in the implementation of the business plan and strategy as laid down by the Board. The day-to-day management and operations of the Enlarged Group are operated independently from the influence of the controlling Shareholders and their respective close associates.

(b) Financial independence

The Target Group has an independent financial system and makes financial decisions according to its own business needs. As at 31 December 2012, 31 December 2013, 31 December 2014 and 31 August 2015, the Target Group’s aggregate amounts due from/(to) the Directors, controlling Shareholders and their respective close associates amounted to approximately RMB259.6 million, RMB274.2 million, RMB(36.8) million and RMB(384.8) million, respectively. The above amounts will be settled prior to or upon the Completion. During the Track Record Period and up to the Latest Practicable Date, Ms. Cui and her close associates had provided personal guarantees for the banking facilities used by the Target Group. The banks have agreed in principle that the above personal guarantees will be released and replaced by the corporate guarantees executed by the Company upon Listing. Save as disclosed above, the Directors are of the view that the Enlarged Group is not financially dependent on the controlling Shareholders or their respective associates in the business operations and the Target Group is able to obtain external financing on market terms and conditions for the business operations as and when required.

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The operations of the Enlarged Group are independent of and not connected with the controlling Shareholders. The Target Group has established its own organizational structure comprising individual departments including project development, cost management, accounting and finance, procurement, design, sales and marketing, customers services, legal, human resources, internal control and risk management, each with specific areas of responsibilities. The Target Group has also established various internal control procedures to facilitate the effective operation of its business.

During the Track Record Period and up to the Latest Practicable Date, the Target Group had independent access to suppliers of the Target Group for the business operation and all of the customers are Independent Third Parties. All of the operating subsidiaries of the Target Group hold the licences necessary for the operation of the Target Group’s business in their own names.

CORPORATE GOVERNANCE MEASURES ADOPTED BY THE GROUP

The Directors believe that there are adequate corporate governance measures in place to manage any potential conflicts of interest and ensure compliance with the Non-Competition Deed by the controlling Shareholders. In addition, the Company has adopted the following corporate governance measures to further strengthen protection of the interests of the Shareholders:

(i) the Company is committed to ensuring that the Board has a balanced composition of executive and non-executive Directors (including independent non-executive Directors) so that there is a strong independent element on the Board, which can effectively exercise independent judgment. The independent non-executive Directors, details of whom are set out in the section headed “Directors and Senior Management of the Enlarged Group” in this circular, together possess the requisite industry knowledge and experience for their views to carry weight. The majority of the independent non-executive Directors have experience as directors of listed companies and will be able to provide impartial and professional advice to protect the interests of the minority shareholders;

(ii) any Director with material interest in any matter in respect of which a conflict or potential conflict of interest with the Enlarged Group may arise must make full disclosure in respect of such matter to the Board, and any conflicted Director, will abstain from participation in any board meeting when matters relating to any rights granted in favour of the Company under the Non-Competition Deed by the controlling Shareholders, unless his attendance is requested by a majority of the independent non-executive Directors. Notwithstanding his attendance, he shall not vote or be counted towards the quorum in respect of such matters;

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(iii) the independent non-executive Directors will review the compliance by the controlling Shareholders and enforcement of the Non-Competition Deed on an annual basis. The controlling Shareholders will provide all information requested by the Enlarged Group which is necessary for such review by the independent non-executive Directors and the Enlarged Group will disclose such matters received by the independent non-executive Directors in its annual reports or by way of announcements; and

(iv) the controlling Shareholders will make an annual declaration on its compliance with the Non-Competition Deed in the annual report of the Company and ensure that the disclosure of details of the compliance with and the enforcement of the Non-Competition Deed is consistent with the principles of disclosure under the Corporate Governance Code contained in Appendix 14 to the Listing Rules.

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CONNECTED PERSONS

Mr. Cui is the spouse of Ms. Chai, who is an executive Director and the chairperson of the Board. Mr. Cui and Ms. Chai are the parents of Ms. Cui, the controlling Shareholder, who was indirectly interested in approximately 65% of the issued share capital of the Company as at the Latest Practicable Date. Upon Completion, Ms. Chai will remain as one of the executive Directors and Ms. Cui will be indirectly interested in approximately 75% of the total issued Shares of the Company (prior to any conversion of the Convertible Bonds and the Convertible Preference Shares) and will continue to be the controlling Shareholder of the Company.

Mr. Cui is the legal and beneficial owner of the entire issued share capital of Forever Luxury Enterprises Limited, which in turn holds the entire equity interest in Market Achiever Limited. Market Achiever Limited holds, through its wholly-owned subsidiary, the entire equity interest in East Gain Secretarial Services Limited (“East Gain”) and Ms. Cui is a director of East Gain.

Fusong Ground is a wholly-owned subsidiary of Fusong Changbaishan which is in turn wholly-owned by Jilin Ground Tourism Investment. Jilin Ground Tourism Investment is legally and beneficially owned as to 65% by Ms. Cui and 35% by the Company ultimately.

長春市天達物業服務有限公司 (Changchun Tianda Property Service Company Limited*) (“Changchun Tianda”) is a wholly owned subsidiary of 吉林省天達資產管理有限公司 Jilin Tianda Assets Management Company Limited* (“Jilin Tianda”) which is in turn wholly owned by 吉林省家和投資有限公司 (Jilin Jiahe Investments Company Limited*). Jilin Jiahe Investments Company Limited is legally and beneficially owned by Mr. Cui and Ms. Chai.

As such, East Gain, Fusong Ground, Changchun Tianda and Jilin Tianda are connected persons of the Company.

CONTINUING CONNECTED TRANSACTION EXEMPT FROM ANNUAL REVIEW, ALL DISCLOSURE AND SHAREHOLDERS’ APPROVAL REQUIREMENTS

During the Track Record Period, the following transactions had been entered into between our Group and the relevant connected persons of our Company which would be considered de minimis continuing connected transaction for the Company under Chapter 14A of the Listing Rules upon Listing:

Lease from East Gain in relation to the use of a motor vehicle

On 1 April 2014, the Company and East Gain and China Motion Holdings Limited (“China Motion”, now known as “Ground Holdings Limited”), a wholly owned subsidiary of the Company, entered into a licence agreement (the “Licence Agreement”) pursuant to which East Gain (as licensor) agreed to grant to China Motion (as licensee) a non-exclusive licence to use a motor vehicle (the “Vehicle”) commencing from 1 April 2014 and to be expired upon termination by one-month notice in writing served by China

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Motion to East Gain. The monthly licence fee is HK$18,000. The annual amount payable by China Motion to East Gain is expected to be HK$216,000. According to the Licence Agreement, all maintenance fee, charges, and disbursements directly associated with the use of the Vehicle shall be payable by China Motion.

Historical transactions amounts

The annual licence fee paid by China Motion to East Gain for the Vehicle for the year ended 31 March 2015 amounted to HK$216,000.

Proposed annual cap and basis of determination

We expect the annual cap for the licence fee payable by China Motion to East Gain under the above continuing connected transaction for each of the three years ending 31 March 2018 is HK$216,000, HK$216,000 and HK$216,000 respectively.

The annual cap mentioned above is determined by our Group with reference to the monthly licence fee in the open market.

Listing Rules Implications

As each of the percentage ratios (other than the profits ratio) in respect of the annual cap for the licence fee payable under the Licence Agreement is less than 5% and the annual cap for the licence fee is below HK$3,000,000, the transaction under the Licence Agreement constitutes continuing connected transaction for the Company under Chapter 14A of the Listing Rules and is fully exempt from shareholders’ approval, annual review and all disclosure requirements under the Listing Rules.

Lease from Jilin Tianda in relation to the office premises of the Target Group in Changchun

Background

On 10 November 2010, Ground Real Estate and Jilin Tianda entered into a lease agreement, pursuant to which Jilin Tianda (as landlord) agreed to lease the office premises located on the 8th to 10th Floor, Ground Building, 4388 Xian Road, Green Garden District, Changchun (the “Office Premises”), to Ground Real Estate (as tenant), for use as office for a period of 50 years commencing from 10 November 2010, at nil consideration. The Target Group occupied the Office Premises as headquarters of the Target Group.

As the Office Premises is well established and known to the business partners of the Target Group, it is the intention of the Target Group that it will continue to use the Office Premises upon Completion as office instead of moving to new premises. As such, the transaction will constitute a continuing connected transaction for the Company under Chapter 14A of the Listing Rules upon Completion.

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Upon Completion, Ground Real Estate as tenant and Jilin Tianda as landlord will enter into a lease agreement (the “Lease Agreement”) for the Office Premises at an annual rent of RMB1,045,000 payable in four instalments, which is determined with reference to the prevailing market rate for comparable premises in the same locality. The Lease Agreement shall supersede the previous lease agreement mentioned above and effective upon completion, and the term of the Lease Agreement is one year commencing from the Completion Date, and is renewable upon the signing of a new lease agreement.

Proposed annual cap and basis of determination

The annual cap for the rent payable by Ground Real Estate under the Lease Agreement is RMB1,045,000.00.

In arriving at the above annual cap, the Directors have considered the prevailing market rate for comparable premises in the same locality as at 31 October 2015. An independent valuer, has reviewed the annual rental payable and confirmed that the annual rental payable under the Lease Agreement reflects the prevailing market rates of properties with similar locations and sizes to the Office Premises as at 31 October 2015.

Listing Rules Implications

As each of the percentage ratios (other than the profits ratio) in respect of the annual cap for the rent payable under the Lease Agreement is less than 5% and the annual cap for the rent is below HK$3,000,000, the transaction under the Lease Agreement constitutes a continuing connected transaction for the Company under Chapter 14A of the Listing Rules and is fully exempt from shareholders’ approval, annual review and all disclosure requirements under the Listing Rules.

Management Agreement from Changchun Tianda in relation to the Office Premises

Background

Changchun Tianda is the property management company of Ground Building in which the Office Premises is located. In light of the Lease Agreement and the need for property management services thereat, Ground Real Estate will enter into a property management agreement (the “Management Agreement”) with Jilin Tianda and Changchun Tianda upon Completion, pursuant to which Changchun Tianda shall provide property management services at the Office Premises, in return, Ground Real Estate shall pay management fees to Changchun Tianda. The monthly property management fee is RMB5,002.2 payable quarterly, which is determined with reference to the property management charges for premises with comparable size and setting. The term of the Management Agreement is the same as the Lease Agreement.

Proposed annual cap and basis of determination

The annual cap for the management fee payable by Ground Real Estate under the Management Agreement is RMB61,000.

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In arriving at the above annual cap, the Directors have considered the management charges for premises with comparable size and setting as at 31 October 2015. An independent valuer, has reviewed the annual management fees payable and confirmed that the annual management fees payable under the Management Agreement reflects the prevailing market rates of premises with comparable size and setting as at 31 October 2015.

Listing Rules Implications

As each of the percentage ratios (other than the profits ratio) for the annual consideration payable under the Lease Agreement is less than 0.1%, the transaction under the Lease Agreement constitutes a continuing connected transaction for the Company under Chapter 14A of the Listing Rules and is fully exempt from shareholders’ approval, annual review and all disclosure requirements under the Listing Rules.

EXISTING CONTINUING CONNECTED TRANSACTIONS BETWEEN THE TARGET GROUP AND AN SUBSIDIARY OF THE COMPANY

During the Track Record Period, the following connected transaction had been entered into between our Group and the relevant connected person of our Company which constitutes a connected transaction for the Company under Chapter 14A of the Listing Rules. However, upon Completion, the relevant connected person will become a wholly-owned subsidiary of the Company. The connected transaction will become an intra-group transaction and will not constitute a connected transaction upon Completion.

Management agreement between Fusong Ground Real Estate Development Company Limited and Ace Plus Global Limited in relation to a property development project

On 8 December 2012, Fusong Ground Real Estate and Ace Plus Global Limited (“Ace Plus”) entered into a management contract (“Management Contract”), pursuant to which Ace Plus would provide management services to Fusong Ground Real Estate in relation to a property development project. The Management Contract does not have any fixed term and is expected to continue until the property development project is completed. Fusong Ground Real Estate shall pay Ace Plus service fees.

In 2013, the Company acquired the entire equity interest in Ace Plus and the shareholder’s loan owing by Ace Plus to the original shareholder, an independent third party. Details of the transaction were stated in the circular made by the Company on 30 September 2013. Ace Plus owns 35% equity interest of Jilin Ground Tourism Investment. Jilin Ground Tourism Investment in turn holds, through its wholly-owned subsidiary, the entire equity interest in Fusong Ground Real Estate. Upon completion of the acquisition of Ace Plus, Ace Plus became an indirectly wholly-owned subsidiary of the Company. The Management Agreement between Ace Plus, a wholly-owned subsidiary of the Company, and Fusong Ground Real Estate, a connected person, constitutes a continuing connected transaction under the Listing Rules. Upon Completion, Fusong Ground Real Estate will become a wholly-owned subsidiary of the Company. The Management Contract will become an intra-group transaction. Pursuant to Rule 14A.18 of the Listing Rules, a subsidiary of the listed issuer is not a connected person if it is directly or indirectly wholly-owned by the listed issuer. Therefore, the Management Contract will cease to be considered as a connected transaction on the part of the Company upon Completion.

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CONFIRMATION FROM THE DIRECTORS

The Directors are of the view that (i) the Licence Agreement, the Lease Agreement and the Management Agreement have been entered into in the ordinary and usual course of business of the Enlarged Group; and (ii) Licence Agreement, the Lease Agreement, the Management Agreement and the transactions contemplated therein have been negotiated on an arm’s length basis, on normal commercial terms and are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

CONFIRMATION FROM THE JOINT SPONSORS

The Joint Sponsors have reviewed relevant information, documentation and historical data in relation to the continuing connected transactions described above. On this basis, the Joint Sponsors are of the view that the continuing connected transactions described above were entered into in the ordinary and usual course of the business of the Enlarged Group, on normal commercial terms, and such transactions and their respective proposed annual caps are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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DIRECTORS

The Board will consist of six Directors upon Completion, comprising three executive Directors and three independent non-executive Directors.

The following table sets out certain information of the Directors and their roles and responsibilities in the Company upon Completion:

Date of appointment as Date of joining Name Age Position Roles and responsibilities Director the Company

Chai Xiu 50 executive overall corporate planning, 6 November 2013 6 November 2013 Director and strategic policy making the chairperson and overseeing overall of the Board management and a member of each of the Remuneration Committee and Nomination Committee

Wang 47 executive overall operation and 1 February 2015 1 February 2015 Guanghui Director management of the Enlarged Group’s property development and management business

Huang 47 executive overall operation and 1 February 2015 1 February 2015 Bingxing Director management of the Group’s telecommunications retail sales and management services business

Chan Yuk Tong 53 independent chairperson of the Audit 29 November 29 November non-executive Committee and 2013 2013 Director Remuneration Committee and a member of the Nomination Committee

Mei Jianping 55 independent chairperson of the 29 November 29 November non-executive Nomination Committee 2013 2013 Director and a member of each of the Audit Committee and Remuneration Committee

Wei Lidong 40 independent a member of each of the 1 February 2015 1 February 2015 non-executive Audit Committee and Director Remuneration Committee

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EXECUTIVE DIRECTORS

Ms. Chai Xiu (柴琇), aged 50, was appointed as an executive Director and the chairperson of the Board in November 2013. She was also the chief executive officer of the Company from November 2013 to November 2015. Ms. Chai is also a member of Remuneration Committee and Nomination Committee. Ms. Chai is a businesswoman with over 15 years of working experience primarily in the property and dairy product industries in the PRC. Since 2010, she has been the chief executive officer of Ground Investment Holding, where she is primarily in charge of the overall operation of its property development and management business in Jilin Province, the PRC.

Ms. Chai is a director of the following subsidiaries of the Company:

Name of company Period of service

Ground Holdings Limited November 2013 – present Ground Telecom Group Limited June 2014 – present (廣訊通信集團有限公司) Victory Marker Limited (先豪有限公司 ) November 2013 – present Ground Telecom Investment Limited June 2014 – present (廣訊通信投資有限公司) Ground Data System Limited (廣澤電腦有限公司) November 2013 – present Biara Investments Limited November 2013 – present Master Form Limited November 2013 – present Target Lane Investments Limited November 2013 – present Sungloss International Limited November 2013 – present Ground Properties (HK) Limited November 2013 – present (廣澤置業（香港）有限公司) Jackie Industries Limited (俊建實業有限公司) November 2013 – present World Sheen Properties Limited (偉潤置業有限公司) November 2013 – present Frontier Power Investments Limited November 2013 – present World Rich Management Limited (華益管理有限公司) March 2014 – present Ace Innovation Limited November 2013 – present Zeta Global Holdings Limited May 2015 – present Top Express International Limited May 2015 – present (泰通國際有限公司) Ace Plus Global Limited November 2013 – present Goodyear November 2013 – present Sino Success Consultants Limited (中成顧問有限公司) November 2013 – present New Glory Consultants Limited (新安顧問有限公司) November 2015 – present

Ms. Chai is also a director of the following Target Group Companies:

Name of company Period of service

Ground Real Estate November 2010 – present Jilin Ground Real Estate November 2009 – present Jilin Ground Tourism Investment January 2013 – present Fusong Changbaishan December 2011 – present Jilin Zhujia May 2011 – present

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From 2005 to 2010, she served as the chief executive officer of Jilin Guangze Group where she was responsible for the overall operation and management of the group, including dairy business and the real estate development and management business. From 2001 to 2005, she served as the general manager of 廣澤乳業有限公司 (Ground Dairy Industry Co., Ltd.), where she was responsible for the overall operation and management of the company, including administration, product development, sales and after sales service. Ms. Chai obtained an EMBA degree from Cheung Kong Graduate School of Business in October 2009.

Ms. Chai is the mother of Ms. Cui, the controlling Shareholder and a senior management of the Group.

Mr. Wang Guanghui (王廣會), aged 47, was appointed as an executive Director in February 2015. Mr. Wang has over 23 years of experience in real estate industry, specializing in construction project development, planning and management. He also has extensive experience in financial management. Mr. Wang joined the Ground Real Estate Group in May 2014.

Ms. Wang is a director of the following subsidiaries of the Company:

Name of company Period of service

Ground Holdings Limited February 2015 – present Victory Marker Limited (先豪有限公司) February 2015 – present Ground Data System Limited (廣澤電腦有限公司) February 2015 – present Biara Investments Limited February 2015 – present Master Form Limited February 2015 – present Target Lane Investments Limited February 2015 – present Sungloss International Limited February 2015 – present Ground Properties (HK) Limited February 2015 – present (廣澤置業（香港）有限公司) Jackie Industries Limited (俊建實業有限公司) February 2015 – present World Sheen Properties Limited (偉潤置業有限公司) February 2015 – present Frontier Power Investments Limited February 2015 – present World Rich Management Limited (華益管理有限公司) February 2015 – present Jilin World Rich Management Limited May 2015 – present (吉林省華益企業管理諮詢有限公司) Ace Innovation Limited February 2015 – present Zeta Global Holdings Limited May 2015 – present Top Express International Limited May 2015 – present (泰通國際有限公司) Ace Plus Global Limited February 2015 – present Goodyear February 2015 – present Sino Success Consultants Limited (中成顧問有限公司) February 2015 – present

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Mr. Wang is also a director of the following Target Group Companies:

Name of company Period of service

Jilin Xinrui December 2014 – present Ground Real Estate April 2015 – present Jilin Ground Tourism Investment May 2015 – present Jilin Ground Real Estate August 2015 – present

He was a deputy general manager of 復地集團長春兆基房地產開發有限公司 (Shanghai Forte Group Changchun Company*) from July 2007 to September 2013. Mr. Wang joined 新星宇建設集團有限公司 (Firstar Construction Group Limited*) in 1993 and held various positions in 長春新星宇集團房地產開發有限公司 (Changchun Firstar Group Property Development Company Limited*), including chief project manager, group deputy general manager, chief engineer, etc. from 2001 to 2007. Mr. Wang graduated from Harbin University of Civil Engineering and Architecture (now known as Harbin Institute of Technology) in August 1996 and obtained a Bachelor degree in Civil Engineering from Beijing Jiaotong University in January 2009. He obtained a Master degree in Project Management and Traffic Engineering from Jilin University in December 2011.

Mr. Huang Bingxing (黃炳興), aged 47, was appointed as an executive Director in February 2015.

Mr. Huang is a director of the following subsidiaries of the Company:

Name of company Period of service

Shanghai CM Concept March 2010 – present Shanghai Motion JUNS December 2013 – present Shanghai Xinhua Motion October 2010 – present

He joined 上海潤迅概念通信產品連鎖銷售有限公司 (Shanghai CM Concept Communications Products Franchise Sale Company Limited*) (“Shanghai CM Concept”), a wholly-owned subsidiary of the Company, in December 2000. Mr. Huang has over 14 years of working experience in the telecommunication services industry in the PRC. He is primarily responsible for the overall operation and management of the Group’s telecommunications retail sales and management services business. Mr. Huang obtained an MBA degree from University of Northern Virginia in November 2008.

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INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Chan Yuk Tong (陳育棠), aged 53, was appointed as an independent non-executive Director of the Company, a member and the chairman of Audit Committee and Remuneration Committee and a member of Nomination Committee in November 2013. Mr. Chan has extensive experience in corporate finance, financial advisory and management, professional accounting and auditing. He is currently a director of Ascenda Cachet CPA Limited. Mr. Chan has been an independent non-executive director of Global Sweeteners Holdings Limited (Stock Code: 3889) since June 2008, FDG Electric Vehicles Limited (Stock Code: 729) since November 2006 and Kam Hing International Holdings Limited (Stock Code: 2307) since March 2004, both companies listed on the Main Board of the Stock Exchange. Mr. Chan had also been an independent non-executive director of each of Ausnutria Dairy Corporation Limited (Stock Code: 1717) from September 2009 to January 2015, BYD Electronic (International) Company Limited (Stock Code: 285) from March 2009 to June 2013, Xinhua Winshare Publishing and Media Co., Ltd. (Stock Code: 811) from April 2007 to July 2013, Daisho Microline Holdings Limited (Stock Code: 567) from September 2004 to August 2013, and a non-executive director of Golden Shield Holdings (Industrial) Limited (Stock Code: 2123) from June 2014 to December 2014. Mr. Chan was an independent non-executive director of Anhui Conch Cement Company Limited, a company listed on the Main Board of the Stock Exchange (Stock Code: 914) and the Shanghai Stock Exchange (Stock Code: 600585) from June 2006 to May 2012. Mr. Chan obtained a Bachelor degree in Commerce from the University of Newcastle, Australia in May 1985 and a Master degree in Business Administration from the Chinese University of Hong Kong in December 2005. He is a fellow member of The Hong Kong Institute of Certified Public Accountants and a member of the CPA Australia.

Mr. Mei Jianping (梅建平), aged 55, was appointed as an independent non-executive Director of the Company, a member and the chairman of Nomination Committee and a member of Audit Committee and Remuneration Committee in November 2013. Mr. Mei has been a professor of finance at Cheung Kong Graduate School of Business in Beijing, the PRC since 2006. Mr. Mei has also been an independent non-executive director of Powerlong Real Estate Holdings Limited (Stock Code: 1238) since June 2008 and of MIE Holdings Corporation (Stock Code: 1555) since November 2010, both of which are listed on the Main Board of the Stock Exchange. He was also appointed as an independent non-executive director of China Greenland Rundong Auto Group Limited (formerly known as “China Rundong Auto Group Limited”) (Stock Code: 1365), a company listed on the Main Board of the Stock Exchange, in July 2014. He has published a number of books and articles on topics related to finance. Mr. Mei received a Bachelor degree in Mathematics from Fudan University, the PRC in July 1982, a Master degree and a Doctorate in Economics from Princeton University, USA in January 1989 and June 1990 respectively.

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Mr. Wei Lidong (尉立東), aged 40, was appointed as an independent non-executive Director in February 2015. He has over 15 years of experience in equity investments, equity trust and assets management. He currently serves as alternate chairman of China Mergers & Acquisitions Association (the “CMAA”) and a director of the CMAA Buyout Funds Committee since 2009. Mr. Wei has been a managing partner and president of 北京惠農資本管理有限公司 (Beijing Huinong Capital Management Co., Ltd.), a company specializing in equity investments and risk investments. During 2007 to 2009, he was a vice president of 北京錦瑞宏泰投資顧問有限公司 (Beijing Jinrui Hongtai Investment Consultant Company Limited*) (formerly known as 北京新天域投資管理有限公司 (Beijing New Horizon Investment Management Company Limited*)), a private equity fund mainly focused in the PRC. He was a senior deputy manager of 中國華融資產管理股份有限公司 (China Huarong Asset Management Co., Ltd.*) from 2001 to 2007. In addition, Mr. Wei is also an expert of developing financial system business in the PRC. Mr. Wei obtained a Bachelor Degree in Engineering from Tsinghua University in July 1999.

Save as disclosed above and in the section headed “Disclosure of Interests” in Appendix VIII to this circular, each of the Directors (i) had no other relationship with any Directors, senior management or substantial or controlling Shareholders of the Company as of the Latest Practicable Date; (ii) did not hold any other directorships in listed public companies in the three years prior to the Latest Practicable Date; (iii) did not have any interest in the Shares within the meaning of Part XV of the SFO as of the Latest Practicable Date.

Save as disclosed above, to the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, there were no other matters with respect to the appointment of the Directors that need to be brought to the attention of the Shareholders and there was no information relating to the Directors that is required to be disclosed pursuant to Rules 13.51(2)(h) to (v) of the Listing Rules as at the Latest Practicable Date.

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SENIOR MANAGEMENT

The following persons will be the senior management of the Enlarged Group:

Effective date of Date of joining the Name Age Position Roles and responsibilities position Enlarged Group

Chen Zhihao 41 General vice president overseeing the operation and 1 September 2014 10 April 2000 integration of the front office of the telecommunications retail sales and management services business of the Group

Zhang Lihong 43 General manager acting as the general manager of 22 October 2013 22 October 2009 Baishan Ground Real Estate, responsible for its overall operation

Min Zhi 42 General manager acting as the general manager of Jilin 19 August 2013 06 May 2011 Ground Real Estate, responsible for its overall operation and project development

Xu Yingchuan 43 General manager acting as the general manager of the 24 May 2012 22 October 2009 Yanji Huize, responsible for the overall operation of Guangze Red House

Ji Ping 40 Assistant president acting as assisting president of Ground 19 May 2015 25 February 2011 Real Estate, responsible for tendering, purchasing, human resources and administrative management

Cui Xintong 25 Business development responsible for exploring new business 23 March 2015 23 March 2015 director opportunities, formulate business plan, and executing systematic prospecting, maintaining relationship with existing and potential business partners

Ng Man Kit Micky 39 Finance and Investor responsible for the Group’s financial 19 January 2015 19 January 2015 Relations Director management and general management of operation in Hong Kong

Lung Yuet Kwan 48 Chief financial officer responsible for advising the Board on 01 November 2013 23 December 2005 and company corporate governance matters secretary

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Mr. Chen Zhihao (陳志浩), aged 41, joined the Group in April 2000 and is currently the general vice president of the telecommunications retail sales and management services business of the Group. He is a supervisor of 上海潤迅君斯通信科技有限公司 (Shanghai Motion JUNS Communication Technology Company Limited*) (“Shanghai Motion JUNS”). Mr. Chen has over 15 years of working experience in the telecommunication services industry in the PRC. He is responsible for the operation and integration of the front office of the telecommunications retail sales and management service business, especially in charge of the mobility department, telephone business department, terminal business department and marketing department of 上海潤迅概念通信產品連鎖銷售有限公司 (Shanghai CM Concept Communications Products Franchise Sale Company Limited*). Mr. Chen graduated from University of Shanghai for Science and Technology, the PRC (formerly known as 上海機械高等專科學校 (Shanghai Mechanics School*)) with major in Foreign Accounting in July 1995 and obtained a Bachelor degree in Computer Information Management from School of Continuing Education of Fudan University, the PRC in 2000.

Ms. Zhang Lihong (張麗紅), aged 43, joined the Target Group in October 2009 and was appointed as general manager of Baishan Ground Real Estate in October 2013 and responsible for its overall operation. Ms. Zhang was the office manager of Jilin Ground Real Estate from October 2009 to July 2012 and was responsible for its overall office administration. Ms. Zhang was the general manager of Fushong Ground from July 2012 to November 2012 and responsible for the overall operation of Fushong Ground. Prior to joining the Target Group, Ms. Zhang was the production director of 北康釀造食品有限公司 (Beikong Brewing Food Company Limited*) from July 2006 to October 2009. Ms. Zhang obtained her Bachelor degree of Science in Economic Management from Party School of the Jilin Province Committee of CPC, the PRC in December 2003.

Ms. Zhang is the sister-in-law of Ms. Chai and Ms. Cui’s aunt.

Mr. Min Zhi (閔治), aged 42, joined the Target Group in May 2011 as the general manager of the customer relations centre and was further appointed as general manager of Jilin Ground Property Services in February 2012 and responsible for customer relations and property management. Mr. Min was appointed as general manager of Jilin Ground Real Estate in August 2013. Prior to joining the Target Group, Mr. Min was a manager in 長春萬科房地產開發有限公司 (Changchun Vanke Real Estate Company Limited*) from November 2004 to April 2011. Mr. Min has extensive experience in property management and project development. Mr. Min obtained his Bachelor degree in administration management from Jilin University, the PRC in December 2000.

Mr. Xu Yingchuan (徐映川), aged 43, joined the Target Group in October 2009 and was appointed as general manager of Yanji Huize in May 2012. Mr. Xu is responsible for the overall operation of the Guangze Red House. Mr. Xu joined the Target Group as a design director responsible for the design management of Amethyst City in Jilin City in October 2009. He was promoted to vice general manger of research and development centre of the Target Group in November 2010 and responsible for the design management of Amethyst City and Guangze International Shopping Centre of the Target Group. He was further promoted to the post of general manager of the research and development centre of the Target Group in September 2011 and responsible for design management of

– 272 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND SENIOR MANAGEMENT OF THE ENLARGED GROUP all projects of the Target Group. Prior to joining the Target Group, Mr. Xu was a chief project management officer of 長春中東房地產開發有限公司 (Changchun Zhongdong Real Estate Development Company Limited*) from October 2007 to September 2009. Mr. Xu was the officer of architecture department in 吉林省建苑設計集團有限公司 (Jilin Jianyuan Design Group Company Limited*) from August 1994 to October 2007. Mr. Xu obtained his Bachelor degree of Science in Architecture from Jilin Institute of Architecture and Civil Engineering (吉林建築工程學院), the PRC in July 1994.

Ms. Ji Ping (計平), aged 40, joined the Target Group in February 2011 and was appointed as vice president of Ground Real Estate in May 2015. She is responsible for tendering, purchasing, human resources and administrative management of the Group. Prior to joining the Group, Ms. Ji was the purchasing director in 廣澤乳業有限公司 (Ground Dairy Industry Co., Ltd.*) (formerly known as Jilin Dairy Group Guangze Co., Ltd.) responsible for the purchasing management from September 2001 to February 2011. Ms. Ji completed her study in financial accounting from Jilin Radio and TV University (吉林廣播電視大學), the PRC in July 1998.

Ms. Ji is the sister-in-law of Ms. Chai and Ms. Cui’s aunt.

Ms. Cui Xintong (崔薪瞳), aged 25, joined the Company in March 2015 and is currently the business development director of the Company. Ms. Cui is responsible for exploring new business opportunities, formulating business plan, and executing systematic prospecting, maintaining relationship with existing and potential business partners, developing, coaching and managing a professional team to deliver excellent service and ensure business sustainability. Ms. Cui was an assistant president of Ground Investment Holding from September 2013 to February 2015 and an assistant vice president of 北京時代風華投資有限公司 (Beijing Times Talent Investment Co., Ltd.*) from July 2011 to December 2011. Ms. Cui obtained her Bachelor degree of Science in Business Administration from Northeastern University, Boston, USA in August 2013.

Ms. Cui is the controlling Shareholder of the Company and the daughter of Ms. Chai. Upon Completion, Ms. Cui will remain as the controlling Shareholder of the Company.

Mr. Ng Man Kit Micky (伍文傑), aged 39, joined the Company as the Finance and Investor Relations Director in January 2015, where he is responsible for the Group’s financial management and general management of operation in Hong Kong. Mr. Ng has extensive auditing and accounting experience having been with an international professional accounting firm for 15 years and is a member of Hong Kong Institute of Certified Public Accountants. Mr. Ng obtained his joint degree of Bachelor of Science in Mathematics and Management Science from the University of Hull, United Kingdom in July 1998 and a Postgraduate diploma in Business Administration from the University of Birmingham, United Kingdom in June 1999.

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Ms. Lung Yuet Kwan (龍月群), aged 48, joined the Group in December 2005 and is currently the chief financial officer and company secretary of the Company. For her biography, please refer to the paragraph headed “Company Secretary” under this section.

COMPANY SECRETARY

Ms. Lung Yuet Kwan (龍月群), was appointed as company secretary of the Company with effect from 1 November 2013. Ms. Lung is a full-time employee of the Group and is responsible for advising the Board on corporate governance matters. She reports to the chairperson of the Board directly and assists the Board in ensuring effective information flow among the Board members and that the Board policy and procedures are followed. Ms. Lung has more than 20 years of experience in auditing, accounting and financial management. Ms. Lung holds a Bachelor degree in Business from Monash University, Australia. She is an associate member of the Hong Kong Institute of Certified Public Accountants and an associate of The Association of Chartered Certified Accountants. Ms. Lung had duly complied with the relevant training requirement under Rule 3.29 of the Listing Rules.

NON-COMPETITION

Each of the Directors has confirmed that save as disclosed in the sections headed “Relationship with the Controlling Shareholders”, “Directors and Senior Management of the Enlarged Group” and Appendix VIII to this circular, he or she and his/her respective associate(s) are not engaged in, or interested in any business which, directly or indirectly, competes or may compete with the business of the Enlarged Group.

AUDIT COMMITTEE

The Company has established the Audit Committee in compliance with the Corporate Governance Code as set out in Appendix 14 of the Listing Rules (the “Corporate Governance Code”). The primary duties of the Audit Committee are to make recommendations to the Board on the appointment, re-appointment and removal of the external auditors, to monitor the integrity of the Company’s financial statements, to review significant financial reporting judgments contained in them and to review the Company’s financial controls, internal controls and risk management systems.

The Audit Committee currently consists of three independent non-executive Directors, namely, Mr. Chan Yuk Tong, Mr. Mei Jianping and Mr. Wei Lidong. It is currently chaired by Mr. Chan Yuk Tong, an independent non-executive Director.

NOMINATION COMMITTEE

The Company has established the Nomination Committee in compliance with the Corporate Governance Code. The primary duties of the Nomination Committee are to review the structure, size and composition of the Board at least annually, make recommendations to the Board on the appointment or re-appointment of Directors and succession planning for Directors and to assess the independence of independent non-executive Directors.

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The Nomination Committee currently consists of one executive Director and two independent non-executive Directors, namely, Ms. Chai Xiu, Mr. Mei Jianping and Mr. Chan Yuk Tong. It is currently chaired by Mr. Mei Jianping, an independent non-executive Director.

REMUNERATION COMMITTEE

The Company has established the Remuneration Committee in compliance with the Corporate Governance Code. The primary duties of the Remuneration Committee are to make recommendations to the Board on the Company’s policy and structure for remuneration of the Directors and senior management and the remuneration packages of individual executive Directors, non-executive Directors and senior management.

The Remuneration Committee currently consists of one executive Director and three independent non-executive Directors, namely, Ms. Chai Xiu, Mr. Chan Yuk Tong, Mr. Mei Jianping and Mr. Wei Lidong. It is currently chaired by Mr. Chan Yuk Tong, an independent non-executive Director.

COMPENSATION OF DIRECTORS AND SENIOR MANAGEMENT

The emolument for each of the Directors is determined by the Board according to the recommendation of the Remuneration Committee with reference to his/her job complexity, workload and responsibilities with the Company and the remuneration policy of the Company from time to time. The respective remuneration to the Directors has been determined by the Remuneration Committee with reference to their experience, duties, responsibilities, workload and time devoted to the Group and the prevailing market conditions.

The remunerations (including fees, salaries, bonuses, allowances and benefits in kind and pension scheme contribution) paid to the Directors by the Group in aggregate for the three years ended 31 March 2015 were HK$5,446,000, HK$5,287,000 and HK$14,489,000, respectively.

The remunerations (including fees, salaries, bonuses, allowances and benefits in kind and pension scheme contribution) paid to the Group’s five highest paid individuals (including Directors) by the Group in aggregate for the three years ended 31 March 2015 were HK$6,906,000, HK$7,392,000 and HK$12,822,000 respectively.

Save as disclosed above, no other payments have been paid or are payable, or any benefits in kind granted, in respect of the three years ended 31 March 2015, by the Group to the Directors.

Based on the existing remuneration package, the Company estimates the aggregate remuneration payable to, and benefits in kind receivable by, the Directors in respect of the year ending 31 March 2016 to be HK$8,966,058.03.

The above remuneration policy is expected to continue and apply to the Directors and senior management of the Enlarged Group after Completion.

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TRAINING FOR DIRECTORS

Pursuant to the Corporate Governance Code, the Directors have participated in continuous professional development to develop and refresh their knowledge and skills to ensure that their contribution to the Board remains informed and relevant and to ensure they keep updated on the changes in the applicable laws and regulations and the overall development of the operations of the Company.

COMPLIANCE ADVISER

The Company has appointed Octal Capital Limited as its compliance adviser pursuant to Rule 3A.19 of the Listing Rules to advise in the following circumstances in accordance with Rule 3A.23 of the Listing Rules:

(a) before the publication of any regulatory announcement, circular or financial report;

(b) where a transaction, which might be a notifiable or connected transaction, is contemplated including share issues and share repurchases;

(c) where the business activities, developments or results of the Enlarged Group deviate from any forecast, estimate or other information in this circular; and

(d) where the Stock Exchange makes an inquiry of the Company of unusual movements in the price or trading volume of its listed securities or any other matters in accordance with Rule 13.10 of the Listing Rules.

The term of the appointment will commence upon Completion and end on the date on which the Company sends its financial results as required under Rule 13.46 of the Listing Rules for the first full financial year commencing after Completion or until the compliance adviser resigns or its agreement is terminated, whichever is earlier. Where the compliance adviser resigns or its agreement is terminated earlier, the Company shall appoint a replacement compliance adviser within three months of the resignation or termination.

EMPLOYEES OF THE GROUP

As at the Latest Practicable Date, the Group had approximately 1,029 employees. The staff costs (including Directors’ remuneration) incurred by the Group for the three years ended 31 March 2015 were approximately HK$35,795,000, HK$36,235,000 and HK$52,297,000 respectively.

The Group contributes to the social insurance in the PRC and the mandatory provident fund scheme in Hong Kong for eligible employees, and also provides medical insurance, work-related personal injury insurance, maternity insurance and unemployment insurance in the PRC, in accordance with the relevant laws and regulations in the PRC. The Group has enrolled in a mandatory provident fund scheme for the eligible employees in Hong Kong in accordance with the applicable Hong Kong laws

– 276 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. DIRECTORS AND SENIOR MANAGEMENT OF THE ENLARGED GROUP and regulations. Please refer to the section headed “Statutory and General Information – H. Service contracts – 3. Employees’ remuneration and benefits” in Appendix VIII to this circular for details.

DEVIATION FROM CORPORATE GOVERNANCE PRACTICES

Under code provision A.6.7, independent non-executive directors and non-executive directors should attend general meetings and develop a balanced understanding of the views of shareholders. A former independent non-executive Director was unable to attend the annual general meeting of the Company held on 8 August 2014 due to other prior business commitment.

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MANAGEMENT PRESENCE

Rule 8.12 of the Listing Rules requires that an issuer has sufficient management presence in Hong Kong and, in normal circumstances, at least two of the issuer’s executive directors must be ordinarily resident in Hong Kong. Since the major operations of the Group is mainly in the PRC and the operation of the Target Group is located in the PRC, the Enlarged Group will not, on Completion or in the foreseeable future, have sufficient management presence in Hong Kong. Currently, all of the executive Directors reside in the PRC. The Company has applied to the Stock Exchange for, and the Stock Exchange [has granted,] a waiver from strict compliance with Rule 8.12 of the Listing Rules.

Notwithstanding that upon Completion, the Company will not have at least two executive Directors who are ordinarily resident in Hong Kong, the following will continually allow the Company to maintain regular communications with the Stock Exchange for the purpose of Rule 8.12 of the Listing Rules:

(i) having considered the requirements under Rule 8.12 of the Listing Rules, the Company currently has two authorised representatives pursuant to Rule 3.05 of the Listing Rules, who will remain to act as the Company’s principal channel of communication with the Stock Exchange and ensure that the Group complies with the Listing Rules at all times. The two authorised representatives are Ms. Chai Xiu, an executive Director, and Ms. Lung Yuet Kwan, the company secretary of the Company. Ms. Lung is ordinarily resident in Hong Kong and will continue to act as the principal communication channel with the Stock Exchange after the new listing of the shares of the Company. Each of the authorised representatives will be available to meet with the Stock Exchange within a reasonable time frame upon request of the Stock Exchange and will be readily contactable by telephone, facsimile and email (if applicable). Each of the two authorised representatives is authorised to communicate on behalf of the Company with the Stock Exchange;

(ii) each of the authorised representatives has means to contact all members of the Board and senior management team promptly at all times as and when the Stock Exchange wishes to contact the Directors for any matters;

(iii) each executive Director has provided his/her mobile phone number, fax number and email address (if applicable) to the authorised representatives and their respective alternates;

(iv) in the event that an executive Director expects to travel and be out of office, he/she will have to provide his/her contact phone number to the authorised representatives and their respective alternates;

(v) all the executive Directors will provide their mobile phone numbers, office phone numbers, fax numbers and email addresses to the Stock Exchange upon request;

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(vi) Ms. Chai Xiu, an executive Director and Ms. Lung Yuet Kwan, the company secretary, will remain readily contactable by the Stock Exchange during normal Hong Kong office hours and may easily make themselves available to meet with the Stock Exchange upon reasonable prior notice from the Stock Exchange; and

(vii) all Directors who are not ordinary residents in Hong Kong have confirmed that either they possess or will apply for valid travel documents to visit Hong Kong and will be able to meet with the relevant members of the Stock Exchange within a reasonable period of time, when required.

DEALING IN THE SHARES OF THE COMPANY PRIOR TO LISTING

According to Rule 9.09(b) of the Listing Rules, there must be no dealing in the securities for which [REDACTED] is sought by any core connected person of the issuer from four clear business days before the expected hearing date until listing is granted.

As at the Latest Practicable Date, so far as the Company is aware, the controlling Shareholders were the only substantial shareholders of the Company within the meaning of the Listing Rules. Given that the Shares are already publicly traded on the Stock Exchange, the Company has no control of and is not in a position to control dealings in the Shares by any person (other than the controlling Shareholders and the Directors, whether or not they are existing holders of the Shares) who may, as a result of such dealing, become a core connected person of the Company within the meaning of the Listing Rules, by the same token, the Company has also no control of and is not in a position to control the subsequent dealing of shares by such new core connected person(s).

The Company has applied for, and the Stock Exchange [has granted,] a waiver from strict compliance with Rule 9.09(b) of the Listing Rules in respect of any dealing by any holder of the Shares (other than the controlling Shareholders and the Directors and any of their respective close associates) from four clear business days before the expected hearing date until [REDACTED] is granted, on condition that:

(a) the Company promptly releases any inside information to the public in accordance with the Listing Rules;

(b) the Company will procure that none of the controlling Shareholders and the Directors and any of their respective close associates shall deal in the Shares from four clear business days before the expected hearing date until [REDACTED] is granted;

(c) the Company will notify the Stock Exchange if it has come to its knowledge that there is any dealing or suspected dealing in the Shares by any of its core connected persons from four clear business days before the expected hearing date until [REDACTED] is granted; and

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(d) for any person (other than the controlling Shareholders) who, as a result of dealing in the securities of the Company from four clear business days before the expected hearing date until [REDACTED] is granted, becomes a substantial shareholder of the Company (a “Potential New Substantial Shareholder”), the Company confirms that:

(i) such Potential New Substantial Shareholder is currently not a Director or a member of the senior management of the Company or any of its subsidiaries and, to the knowledge of the Company as at the Latest Practicable Date, would not become a Director or a member of the senior management of the Enlarged Group after [REDACTED]; and

(ii) the Company and its management have not had control over the investment decisions of such Potential New Substantial Shareholder or its close associates.

FURTHER ISSUE OF SECURITIES

Rule 10.08 of the Listing Rules provides that no further shares or securities convertible into equity securities of a listed issuer may be issued or form the subject of any agreement to such an issue within six months from the date on which securities of the listed issuer first commence dealing on the Stock Exchange.

In addition, pursuant to Rule 10.07(1)(a) of the Listing Rules, the controlling shareholders of the issuer shall not in the period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholders is made in the [REDACTED] document and ending on the date which is six months from the date on which dealings in the securities of a new applicant commence on the Stock Exchange (the “Lock-Up Period”), dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of those securities of the issuer in respect of which he is or they are shown by [REDACTED] document to be the beneficial owner(s).

The restriction in Rule 10.08 of the Listing Rules applies to the Company solely because it is deemed to be a new [REDACTED] applicant pursuant to Rule 14.54 of the Listing Rules as a result of the Acquisition which constitutes a reverse takeover under the Listing Rules. Save for the issue of [REDACTED] to satisfy part of the consideration of the Acquisition, the deemed new [REDACTED] of the Company will not involve any share offering to the public and hence, there is no concern of new public investors being subject to the risk of dilution within a relatively short time after Completion.

The Company considers that it would be unduly onerous to restrict its ability to raise funds through the issue of Shares or other securities convertible into equity securities of the Company pursuant to the restrictions set out in Rule 10.08 of the Listing Rules, which could have an adverse effect on its business development and might not, therefore, be in the interests of its Shareholders. The Company has applied to the Stock Exchange for, and the Stock Exchange [has granted,] a waiver from strict compliance with Rule 10.08 of the Listing Rules in relation to the restrictions on further issue of Shares or other securities of the Company within six months of [REDACTED], and a consequential

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(i) any issue of Shares or other securities by the Company within the first six months from the Completion Date must be either (a) for cash to fund a specific acquisition of land, assets or business that will contribute to the growth of the Enlarged Group’s operation; (b) for full or partial settlement of the consideration for such acquisition; (c) as a result of the conversion or exercise of the Convertible Bonds in accordance with the terms of the Acquisition; (d) for re-financing; or (e) for general working capital of the Group; and

(ii) each of Ms. Chai, Ms. Cui and Charm Success, as well as Ka Yik will remain as controlling Shareholders of the Company during the first 12 months from the Proposed [REDACTED].

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You should read the following discussion of the Target Group’s results of operations and financial condition in conjunction with the audited consolidated financial information as at and for the years ended 31 December 2012, 2013 and 2014 and for the eight months ended 31 August 2015 or since the date of incorporation where there is a shorter period, including the notes thereto, included in Appendix IIIA to this circular. This historical consolidated financial information is not necessarily indicative of the future performance of the Target Group or the Enlarged Group. For an illustration of the financial information of the Enlarged Group as a result of the Completion of the Acquisition, see “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix V to this circular. The Target Group’s consolidated financial information has been prepared in accordance with HKFRSs, accounting principles generally accepted in Hong Kong and the disclosure requirements in the Companies Ordinance. The following discussion contains forward-looking statements that involve risks and uncertainties. The Target Group’s future results could differ materially from those discussed in such forward-looking statements as a result of various factors, including those set forth under the section headed ‘‘Risk Factors’’ and elsewhere in this circular.

OVERVIEW

The Target Group is a property developer in Jilin Province of the PRC principally engaged in the development, sale and leasing of residential, commercial and tourism properties and property management. As at the Latest Practicable Date, the property portfolio of the Target Group comprised seven property projects all situated in Jilin Province:

• Residential projects: Guangze•Amethyst City (廣澤‧紫晶城), Guangze•Tudors Palace (廣澤‧瀾香), Guangze China House (廣澤蘭亭), Guangze Red House (廣澤紅府) and the residential portion located above Guangze International Shopping Centre (廣澤國際購物中心－住宅)

• Commercial property project: Guangze International Shopping Centre (廣澤國際購物中心)

• Tourism property project: Changbaishan Ground Pine Township International Resort (長白山廣澤果松小鎮國際渡假村)

For the three years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015, the Target Group’s total revenue amounted to approximately RMB531.0 million, RMB553.1 million, RMB805.6 million and RMB808.8 million, respectively, and its profit amounted to approximately RMB140.7 million, RMB91.0 million, RMB200.3 million and RMB159.9 million, respectively.

For further information about the Target Group’s business and operations, including the description of its property portfolio, please refer to the section headed “Business of the Target Group” in this circular.

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BASIS OF PREPARATION

Pursuant to the Reorganisation as set out in “Reorganisation Plan of the Target Group” under the section headed “History and Reorganisation of the Target Group”, Ms. Cui carried out certain steps to form the Target Group for the purpose of the Acquisition, and then the Target Company became the holding company of the Target Group on 14 May 2015. The Target Group formed during the Reorganisations is regarded as a continuing entity as all companies now comprising the Target Group were under the common control of Ms. Cui immediately before and after the Reorganisation.

The financial information of the Target Group for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 includes, the results of operations of and financial position of the Target Group for the Track Record Period as if the current group structure had been in existence since 1 January 2012 or the date of their incorporation/establishment, whichever is earlier.

FACTORS AFFECTING THE TARGET GROUP’S RESULTS OF OPERATIONS

The economy and real estate markets in the PRC

The economic growth, urbanisation and rising standards of living in the PRC have been the main driving forces behind the increasing market demand for properties. The real estate industry in the PRC is significantly dependent on the PRC’s overall economic growth, including the increase in the purchasing power of consumers in the PRC and the resulting demand for residential properties. The overall economic growth in the PRC and the rate of urbanisation will continue to be affected by a number of macroeconomic factors, including changes in the global economy as well as the macroeconomic, fiscal and monetary policies of the PRC government. As the focus of the Target Group’s business during the Track Record Period is mainly in Jilin Province, the economic development and urbanisation rate of Jilin Province as a whole will continue to be important to the growth of the Target Group’s operations.

The PRC property market has experienced significant volatility in recent years, especially as a result of the continuing effects of the global economic and financial crisis and the recent deterioration in the PRC’s economic growth and credit environments. As the property market slows down in the PRC, people become more cautious in investing in the property market and the demand for properties in the PRC has weakened. Any continued economic downturn in China generally, or in Jilin Province or cities in which the Target Group will operate in the future, could have a material adverse effect on its business, results of operations and financial condition.

The regulatory environment and measures affecting the real estate industry in China

The Target Group’s business has been, and will continue to be, affected by the regulatory environment in China, in particular, the policies and measures on property development and related industries. In recent years, the PRC government has implemented a series of measures to contain the perceived over-heated real estate market, for instance, it has (i) tightened the lending requirement in the financial sector, (ii)

– 283 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP increased down payment requirements for residential mortgages, (iii) tightened credit on financing and mortgage loans and (iv) restricted multiple home ownership and investments in residential property outside one’s province of residence in the PRC.

The PRC regulatory measures in the real estate industry will continue to impact the Target Group’s business in the future. Please refer to the paragraph headed ‘‘Risk Factors – Business of the Enlarged Group is subject to extensive government, regulations and the PRC government may introduce further measures to curtail growth in the property sector’’ and the section headed ‘‘Regulatory Overview’’ set out in Appendix II to this circular for more details on the relevant PRC laws and regulations.

Project development schedule and portfolio mix

Property development typically requires substantial capital expenditure and a substantial amount of time to complete. The progress of a development project can be adversely affected by many factors, including but not limited to shortages of construction materials or contractors, financing difficulty, construction accidents, natural catastrophes and adverse weather conditions. The Target Group may also encounter delays in obtaining the necessary zoning, land use, building, development and other required governmental and regulatory licences, permits, approvals and authorisations for its projects. Any delay in the progress of a development project will lead to increased construction costs. Further, if a pre-sold property development is not completed on time, the purchaser or lessee may be entitled to compensation for late delivery. Delays in completion or delivery of development projects may affect the business, financial condition and results of operations of the Target Group. Given that the Target Group has a mix portfolio of residential, commercial and tourism property projects, financial condition, results of operations and cash flows generated from its operations may vary significantly from period to period depending on the type of properties the Target Group sells and the proportion of completed commercial properties the Target Group retains as investment properties.

Pre-sales of property provide an important source of operating cash flow for the Target Group. As such, the progress of property development may affect the timing of the Target Group’s cash inflows. In addition, as the Target Group does not recognise revenue in respect of the sale of a property until its development has been completed and the property has been delivered to the purchaser, the progress of property development may also cause the Target Group’s results of operations to vary significantly from period to period depending on the GFA, timing of delivery of the property sold and the type of property projects launched. During the Track Record Period, the Target Group’s revenue was primarily generated from the phases 1 and 2 of Guangze•Amethyst City (紫晶城) residential project, which were completed in 2011 and 2013 respectively.

Costs of property development

The Target Group’s results of operations are significantly affected by the costs of properties sold, consisting primarily of construction costs, land acquisition costs and borrowing costs. Construction costs mainly consist of construction material costs, costs for design and construction of projects, including payments to third-party contractors,

– 284 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP labour costs and capitalised expenses (including capitalised interest). For the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2014 and 2015, the Target Group’s construction costs, accounted for 75.8%, 61.8%, 60.0%, 61.8% and 67.4% of cost of sales and 56.2%, 46.3%, 44.8%, 44.9% and 36.5% of its revenue, respectively. Whilst land acquisition costs accounted for 24.2%, 33.4%, 35.4%, 33.4% and 27.2% of cost of sales and 17.9%, 25.0%, 26.4%, 24.3% and 14.7% of its revenue for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2014 and 2015 respectively. Borrowing costs accounted for –%, 4.8%, 4.5%, 4.8% and 5.4% of cost of sales and –%, 3.6%, 3.4%, 3.5% and 2.9% of its revenue for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2014 and 2015 respectively. Any significant changes in construction costs, including those under construction contracts will impact the Target Group’s costs of sales and profit margins if the Target Group cannot pass the relevant increase on to its customers.

The Target Group incurs land acquisition costs when it acquires the rights to occupy, use and develop land. In order to have a steady stream of properties available for sale and to achieve continuous growth in the long term, the Enlarged Group will continue to acquire land reserves suitable for development at acceptable costs. Undeveloped land in China’s major cities is becoming increasingly scarce and the costs of acquiring suitable land for property development may increase. Land acquisition costs are also affected by a number of factors, including land location, timing of acquisition, method of acquisition (through tenders, auctions or listings-for-sale on the primary market, and private acquisition and cooperative agreement on the secondary market) and relevant changes in the PRC land acquisition policies and regulations.

Fair value on investment properties

During the Track Record Period, the Target Group had properties that were classified as investment properties, either under construction or completed. As the Target Group expects to hold investment properties, the Target Group will continue to be subject to fluctuation of the fair value of its investment properties in the future in accordance with prevailing market conditions. Any decrease in the fair value of the Target Group’s investment properties may adversely affect its profitability. In addition, fair-value gains are unrealised and do not generate any cash inflow to the Target Group until such investment properties are disposed of at considerations similar to the valuations. The Target Group may therefore experience higher profitability through investment property valuation gains without a corresponding improvement to its liquidity position.

SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of the Target Group’s financial statements in conformity with HKFRSs requires the respective management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other resources. The Target Group’s actual results may differ from these estimates.

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These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The relevant estimates or underlying assumptions that the Target Group has made in the past have been generally in line with its actual results during the Track Record Period or since the date of incorporation where there is a shorter period.

Judgements made by the Target Group’s management in the application of HKFRSs that have significant effects on the respective financial statements and major sources of estimation uncertainty are as follows:

Allocation of construction cost on properties under development

When developing properties, the Target Group typically divides the development projects into phases. Costs directly related to the development of a phase are recorded as the cost of such phase. Costs that are common to several phases are allocated to each phase based on the saleable floor area of each phase as a percentage of the total saleable floor area of the entire project. The cost of the unit sold is determined by the floor area in square meters sold multiplied by the average cost per square meter of that particular phase of the project.

PRC land appreciation taxes

The Target Group is subject to land appreciation taxes in the PRC. However, the implementation and settlement of these taxes varies among various cities in the PRC, and The Target Group has not finalised its land appreciation taxes calculation and payments with any local tax authorities in the PRC. Accordingly, significant judgement is required in estimating the amount of the land appreciation taxes. The Target Group recognised these land appreciation taxes based on management’s best estimates according to the interpretation of the tax rules. The final tax liabilities could be different from the amounts that were initially recorded, and these differences will impact the income tax expense and tax provisions in the periods in which such taxes have been finalised with local tax authorities.

Deferred tax on investment properties

For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties that are measured using the fair value model, the management of the Target Group has reviewed the Target Group’s investment property portfolios and considered that they are held under a business model whose objective is to consume substantially all of the economic benefits embodied in these investment properties over time. Therefore, the management of the Target Group has determined that the presumption that the carrying amounts of investment properties measured using the fair value model are recognise entirely through sale is rebutted. As a result, the Target Group did not recognised deferred taxes on Land Appreciation Tax and only recognised deferred taxes on Enterprise Income Tax in respect of the changes in fair value of the Target Group’s investment properties on the basis that the entire carrying amounts of these properties are recovered through use.

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Valuation of investment properties

Investment properties are stated at fair value based on the valuation performed by independent professional valuers. In determining the fair value, the valuers have based on a method of valuation which involves certain estimates of market conditions. In relying on the valuation report set out in Appendix VIB to this circular, the management of the Target Group has exercised their judgments and are satisfied that the assumptions used in the valuation are reflective of the current market conditions. Changes to these assumptions would result in changes in the fair value of the Target Group’s investment properties and the corresponding adjustments to the amount of gain or loss would be recognised in profit or loss.

The selection of critical accounting policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the Target Group’s financial statements. The following critical accounting policies involve the most significant judgements and estimates used in the preparation of the respective consolidated financial statements.

Revenue recognition

Revenue is recognised in profit or loss when it is probable that the economic benefits will flow to the Target Group and the revenue and costs, if applicable, can be measured reliably on the following basis:

Sales of properties

Revenue from sales of properties is recognised when the risks and rewards of the properties are transferred to the purchasers. Revenue from sales of properties excludes business tax or other sales related taxes and is after deduction of any trade discounts. Deposits and installments received on properties sold prior to the date of revenue recognition are included in the statements of financial position as “deposits from sales of properties”.

Rental income from operating leases

Rental income receivable under operating leases is recognised in profit or loss in equal installments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

Service fee income

Service fee income in relation to property management services and other ancillary services are recognised when such services are provided to customers.

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Investment properties

Investment properties are buildings which are owned or held under a leasehold interest to earn rental income. These include properties that are being constructed or developed for future use as investment properties. Investment properties are stated at fair value, unless they are still in the course of construction or development at the end of the reporting period and their fair value cannot be reliably measured at that time. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in profit or loss.

Income tax

Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

LAT

The Target Group has estimated, made and included in tax provision, LAT according to the requirements set forth in the relevant PRC tax laws and regulations. Its actual LAT liabilities are subject to the determination by the tax authorities upon completion of the property development projects and the tax authorities may disagree with the basis on which the provision for LAT has been calculated. Significant judgement is required in determining the level of provision, as the actual calculation of LAT depends on the ultimate tax determination. Given the uncertainties of the calculation basis of LAT as interpreted by the local tax bureau, the actual outcomes may be higher or lower than those estimated at the end of each reporting period. Any increase or decrease in the actual outcomes/estimates will impact the income tax provision of the period for which such determination is made.

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DESCRIPTION ON CERTAIN KEY ITEMS OF THE CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND MANAGEMENT DISCUSSION AND ANALYSIS ON RESULTS OF OPERATION OF THE TARGET GROUP

Consolidated Statements of Comprehensive Income

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Turnover 530,975,132 553,117,398 805,611,497 635,356,203 808,836,051 Cost of sales (393,592,158) (414,257,651) (601,275,482) (462,174,825) (459,960,428)

Gross profit 137,382,974 138,859,747 204,336,015 173,181,378 348,875,623 Other revenue and other income 691,963 2,012,252 1,378,417 977,122 22,171,801 Selling expenses (23,515,868) (29,951,488) (28,690,743) (14,700,167)_ (12,051,335) Administrative expenses (33,374,380) (45,784,967) (42,749,587) (26,996,551) (33,091,701) Other operating expenses (1,260,000) (564,320) (1,224,284) (164,517) (500,057) Changes in fair value of investment properties 123,176,063 56,673,149 151,948,204 118,248,121 17,731,608 Finance costs (1,979,923) (474,474) (27,645,625) (19,539,841) (41,552,613)

Profit before tax 201,120,829 120,769,899 257,352,397 231,005,545 301,583,326 Income tax expense (60,404,718) (29,811,712) (57,100,448) (51,868,736) (141,668,982)

Profit for the year/ period and total comprehensive income for the year/period 140,716,111 90,958,187 200,251,949 179,136,809 159,914,344

Profit for the year/ period and total comprehensive income attributable to: Owners of the Target Group 96,364,354 67,535,133 140,824,540 128,065,018 103,352,292 Non-controlling interests 44,351,757 23,423,054 59,427,409 51,071,791 56,562,052

140,716,111 90,958,187 200,251,949 179,136,809 159,914,344

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Revenue IACA NOMTO FTETRE GROUP TARGET THE OF INFORMATION FINANCIAL

For the year ended 31 December For the eight months ended 31 August 2012 2013 2014 2014 2015 %of %of Increase/ %of Increase/ %of %of Increase/ Amount Total Amount Total (Decrease) Amount Total (Decrease) Amount Total Amount Total (Decrease) (RMB) (%) (RMB) (%) (%) (RMB) (%) (%) (RMB) (%) (RMB) (%) (%)

– Sales of properties 526,555,469 99.2 543,958,383 98.3 3.3 794,241,618 98.6 46.0 627,001,719 98.7 781,076,669 96.6 24.6 – Rental income – – – – – – – – – – 10,406,296 1.3 N/A – Revenue from property management services 4,419,663 0.8 9,159,015 1.7 107.2 11,369,879 1.4 24.1 8,354,484 1.3 17,353,086 2.1 107.7

Total 530,975,132 100.0 553,117,398 100.0 4.2 805,611,497 100.0 45.6 635,356,203 100.0 808,836,051 100.0 27.3 9 – 290 –

All the revenue from sales of properties for the years ended 31 December 2012, 2013 and 2014 was generated from the sales of Guangze•Amethyst City (廣澤‧紫晶城) – Phase I and Phase II residential project. The revenue from sales of properties for the eight months ended 31 August 2015 was generated from the sales of Guangze International Shopping Centre – Residential and commercial portion and certain remaining units of Guangze•Amethyst City – Phase I and Phase II residential project.

The rental income generated for the eight months ended 31 August 2015 was related to the leasing of certain commercial property units of Guangze International Shopping Centre which commenced operation in January 2015. the Target Group also has its property management services team to provide property management services to the property projects that the Target Group developed and sold. This generated property management service income to the Target Group during the Track Record Period. THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP

Revenue – Sales of properties

For the eight months ended 31 For the year ended 31 December August 2012 2013 2014 2014 2015 Increase/ Increase/ Increase/ Area Area (Decrease) Area (Decrease) Area Area (Decrease) (sq.m.) (sq.m.) (%) (sq.m.) (%) (sq.m.) (sq.m.) (%)

– Recognised GFA – Residential units 109,551 110,558 0.9 181,430 64.1 141,732 69,866 (50.7) – Commercial units 8,831 – (100.0) 2,430 n.a. 2,430 36,095 1,385.4 – Garages/car parks 22,928 35,925 56.7 4,421 (87.7) 2,360 987 (58.2)

Total 141,310 146,483 3.7 188,281 28.5 146,522 106,948 (27.0)

Increase/ Increase/ Increase/ Amount Amount (Decrease) Amount (Decrease) Amount Amount (Decrease) RMB RMB (%) RMB (%) RMB RMB (%)

– Unit price – Residential units per sq.m. 3,594 4,292 19.4 4,433 3.3 4,444 4,046 (9.0) – Commercial units per sq.m. 10,980 – (100.0) 9,971 n.a. 9,971 15,014 50.6 – Garages/car parks per unit 132,632 134,898 1.7 107,458 (20.3) 130,446 108,485 (16.8)

Increase/ Increase/ Increase/ Number Number (Decrease) Number (Decrease) Number Number (Decrease) (%) (%) (%)

– Quantity of units sold – Quantity of residential units sold 1,313 1,327 1.1 2,113 59.2 1,686 721 (57.2) – Quantity of commercial units sold 68 – (100.0) 18 n.a. 18 1,073 5,861.1 – Quantity of garages/car parks sold 499 758 51.9 120 (84.2) 56 26 (53.6)

Increase/ Increase/ Increase/ Amount Amount (Decrease) Amount (Decrease) Amount Amount (Decrease) RMB RMB (%) RMB (%) RMB RMB (%)

– Revenue of different units sold – Residential units 393,717,858 474,476,040 20.5 804,233,012 69.5 629,877,150 282,657,297 (55.1) – Commercial units 96,964,136 – (100.0) 24,229,635 n.a. 24,229,596 541,933,828 2,136.7 – Garages/car parks 66,183,600 102,252,600 54.5 12,895,000 (87.4) 7,305,000 2,820,600 (61.4)

556,865,594 576,728,640 3.6 841,357,647 45.9 661,411,746 827,411,725 25.1 Less: sales tax (30,310,125) (32,770,257) 8.1 (47,116,029) 43.8 (34,410,027) (46,335,056) 34.7

526,555,469 543,958,383 3.3 794,241,618 46.0 627,001,719 781,076,669 24.6

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For the year ended 31 December 2012

For the year ended 31 December 2012, the revenue of the Target Group amounted to RMB530,975,132. The revenue of the Target Group was primarily derived from sales of properties and revenue from property management services. The total income from sales of properties was RMB526,555,469, representing 99.2% of the Target Group’s revenue in 2012, of which RMB393,717,858 was attributed to sales of 1,313 residential units at an average unit price of RMB3,594 per sq.m, RMB96,964,136 attributed to sales of 68 retail commercial units at an average unit price of RMB10,980 per sq.m and RMB66,183,600 attributed to sales of 499 garages/car parks at an average unit price of RMB132,632 per unit. These sales were related to Guangze•Amethyst City – Phase I project. The revenue from property management services was RMB4,419,663, which included the property management services of 1,835 residential units and 68 commercial units. The average monthly property management services fee was RMB1.4 per sq.m. for residential units and RMB2.5 per sq.m. for commercial units.

For the year ended 31 December 2013

For the year ended 31 December 2013, the revenue of the Target Group amounted to RMB553,117,398, representing an increase of RMB22,142,266, or approximately of 4.2% as compared to that of previous year. The increase in revenue was mainly attributable to the increase in the sales of properties by RMB17,402,914, or approximately 3.3%, from RMB526,555,469 in 2012 to RMB543,958,383 in 2013 contributed by an increase in the sales of residential units and garages/car parks by RMB80,758,182 and RMB36,069,000 respectively. The increase in sales of residential units was due to the increase in average unit selling price to RMB4,292 per sq.m. on the residential units in respect of Guangze•Amethyst City – Phase II that sales were recognised during the year ended 31 December 2013 (2012 average unit selling price: RMB3,594 per sq.m. for Guangze•Amethyst City – Phase I) while the total recognised GFA remained stable. For garage/car park sales, the increase was attributable to the increase in the number of garage/car parks sold from 499 units in 2012 to 758 units while the average unit selling price remained at around RMB133,000 per unit to RMB135,000 per unit. On the other hand, there was a decrease in sales of commercial units by RMB96,964,136 because there were no commercial properties completed and ready for delivery at Guangze •Amethyst City – Phase II during the year ended 31 December 2013.

The revenue from property management services of the Target Group, which was generated from 3,162 residential units and 68 commercial units, was RMB9,159,015 for the year ended 31 December 2013, representing an increase of RMB4,739,352, or approximately 107.2%, from RMB4,419,663 for the year ended 31 December 2012. The growth in revenue from property management services was primarily due to the increase in the number of properties managed from 1,903 units in 2012 to 3,230 units in 2013.

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For the year ended 31 December 2014

For the year ended 31 December 2014, the revenue of the Target Group amounted to RMB805,611,497, representing an increase of RMB252,494,099, or approximately of 45.6% as compared to that in 2013. The increase was mainly attributable to the increase in the revenue from sales of properties by RMB250,283,235, or approximately 46.0%, from RMB543,958,383 in 2013 to RMB794,241,618 in 2014.

The increase was resulted from the significant growth in the total recognised GFA of both residential units and commercial units. The total recognised GFA of residential units was 181,430 sq.m., representing an increase of 64.1% compared with that for the year ended 31 December 2013. The significant increase was attributable to the recognition of sales of high-rise residential units with aggregate GFA of 174,938 sq.m. under Guangze•Amethyst City – Phase II (2013: 66,040 sq.m.) representing 96.4% of the total GFA sold, and average price of RMB4,441 per sq.m. (2013: RMB4,015 per sq.m.). These high-rise residential units were completed and delivered to purchasers during the year ended 31 December 2014. For commercial units, the total recognised GFA was 2,430 sq.m. (2013: Nil) resulting in such significant revenue growth in respect of commercial units.

The revenue from the property management services amounted to RMB11,369,879 for the year ended 31 December 2014, representing an increase of RMB2,210,864, or approximately 24.1% as compared to that in 2013. This revenue included the income of the property management services of 5,275 residential units and 86 commercial units. The increase in revenue from property management services was primarily due to the increase in the number of properties managed from 3,230 units in 2013 to 5,361 units in 2014 contributed by more property units completed and delivered to purchasers.

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the revenue of the Target Group amounted to RMB808,836,051, representing an increase of RMB173,479,848, or approximately of 27.3% as compared to the same period in 2014. The increase was mainly attributable to the increase in revenue from sales of properties by RMB154,074,950, or approximately 24.6%, from RMB627,001,719 for the eight months ended 31 August 2014 to RMB781,076,669 for the eight months ended 31 August 2015.

The revenue from sales of properties amounted to RMB781,076,669 for the eight months ended 31 August 2015, of which RMB551,240,707 were related to the property development projects of both residential and commercial portion of Guangze International Shopping Centre and RMB229,835,962 were related to the remaining units of Guangze•Amethyst City – Phases I and II. For the corresponding period in 2014, the revenue of RMB627,001,719 was related to property sales recognised in respect of Guangze•Amethyst City – Phases I and II.

For the eight months ended 31 August 2015, the sales of commercial properties increased to RMB541,933,828 (2014: RMB24,229,596) which was contributed by (i) the sales of retail commercial units at Guangze International Shopping Centre upon completion of construction and delivery to purchasers with a total recognised GFA of 26,872 sq.m. and

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As for the sale of residential units, there was a substantial decrease to RMB282,657,297 (Eight months ended 31 August 2014: RMB629,877,150), primarily attributable to the sales of residential units at Guangze•Amethyst City – Phase II with recognised GFA of 31,081 sq.m. were related to the remaining stock from previous year’s completion. In addition, the sales of residential units were contributed by Guangze International Shopping Centre where a total recognised GFA of 38,785 sq.m. were completed and delivered to purchasers for the eight months ended 31 August 2015.

Cost of Sales

Cost of sales comprises the costs that the Target Group incurs directly in relation to its property development activities; and primarily include costs of properties sold.

Cost of properties sold

The following table sets out a breakdown of costs of properties sold of the Target Group for the Track Record Period:

For the year ended 31 December For the eight months ended 31 August 2012 2013 2014 2014 2015 %of %of %of %of %of Amount Total Amount Total Amount Total Amount Total Amount Total (RMB) (%) (RMB) (%) (RMB) (%) (RMB) (%) (RMB) (%)

– Land acquisition costs 95,228,858 24.2 138,277,329 33.4 213,080,490 35.4 154,271,864 33.4 119,055,935 27.2 – Construction costs 298,363,300 75.8 255,937,423 61.8 360,941,914 60.0 285,541,700 61.8 294,885,937 67.4 – Borrowing costs – – 20,042,899 4.8 27,253,078 4.6 22,361,261 4.8 23,693,514 5.4

Total 393,592,158 100.0 414,257,651 100.0 601,275,482 100.0 462,174,825 100.0 437,635,386 100.0

For the year ended 31 December 2012

For the year ended 31 December 2012, the cost of properties sold of the Target Group amounted to RMB393,592,158. The total cost of sales primarily resulted from land acquisition cost, construction cost and borrowing cost, and accounted for 100.0% of the Target Group’s total cost of sales in 2012. In 2012, the cost of sales were related to Guangze•Amethyst City – Phase I which was entirely funded by internal funds. Accordingly, no interest was incurred/capitalised.

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For the year ended 31 December 2013

For the year ended 31 December 2013, the cost of properties sold of the Target Group amounted to RMB414,257,651, representing an increase of RMB20,665,493, or approximately of 5.3% as compared to that of last year. This increase of cost was in line with the growth of the sales revenue of the residential units, and was attributable to rise of land acquisition costs in line with general industry trends. Among others, the construction costs decreased by RMB42,425,877, or 14.2% from RMB298,363,300 in 2012 to RMB255,937,423 in 2013. The land acquisition costs increased by RMB43,048,471, or 45.2% from RMB95,228,858 in 2012 to RMB138,277,329 in 2013. The increase in land acquisition costs was mainly attributable to the higher land costs in respect of the land in Guangze•Amethyst City – Phase II as compared to that of Phase I. The reason for the decrease in construction costs was that the unit construction costs for Phase II are lower than those of Phase I.

For the year ended 31 December 2014

For the year ended 31 December 2014, the cost of properties sold of the Target Group amounted to RMB601,275,482, representing an increase of RMB187,017,831, or approximately of 45.1% as compared to that of last year. This significant growth of cost was in line with the increase in the sales revenue of the residential and commercial units by the reason of increase in land acquisition and construction costs in line with general industry trends. Among others, the construction costs increased by RMB105,004,491, or 41.0% from RMB255,937,423 in 2013 to RMB360,941,914 in 2014, and the land acquisition costs increased by RMB74,803,161, or 54.1% from RMB138,277,329 in 2013 to RMB213,080,490 in 2014. The increase in land acquisition costs was mainly attributable to the higher proportion of Guangze•Amethyst City – Phase II’s properties sales recognised in 2014 with higher land costs. The construction costs increased by RMB105,004,491, or 41.0%, mainly attributable to the increase in GFA recognised in respect of residential units of 181,430 sq.m. (2013: 110,558 sq.m.) and commercial units of 2,430 sq.m. (2013: Nil).

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the cost of properties sold of the Target Group amounted to RMB437,635,386, representing a decrease of RMB24,539,439, or approximately 5.3% as compared to the corresponding period of last year. The decrease in land acquisition costs was mainly attributable to the fact that the cost of properties sold for the eight months ended 31 August 2015 was related to the sales of Guangze International Shopping Centre commercial and residential units in Baishan City, the average land costs of which were lower than that of Guangze•Amethyst City in Jilin City. The decrease in construction costs was in line with the total GFA recognised.

Gross profit and gross profit margin

For the year ended 31 December 2012

For the year ended 31 December 2012, the gross profit of the Target Group and gross profit margin were RMB137,382,974 and 25.9% respectively.

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For the year ended 31 December 2013

The gross profit of the Target Group amounted to RMB138,859,747 for the year ended 31 December 2013, representing an increase of 1.1% as compared to that of last year. The gross profit margin of Ground Real Estate Group decreased slightly from 25.9% for the year ended 31 December 2012 to 25.1% for the year ended 31 December 2013. The decrease in gross profit margin was due to the fact that there was a decrease in the sales recognised in respect of low-rise residential units from a recognised GFA of 32,985 sq.m. in 2012 to 1,913 sq.m. in 2013, which was of a higher margin. Also, there was no sale of commercial units during 2013 (2012: recognised GFA of 8,831 sq.m.) which was of a higher margin.

For the year ended 31 December 2014

From the year ended 31 December 2013 to the year ended 31 December 2014, the gross profit of the Target Group increased by 47.2% from RMB138,859,747 to RMB204,336,015, and the gross profit margin of the Target Group also increased slightly from 25.1% to 25.4%. The increase in gross profit and gross profit margin was mainly resulted from (i) the sales of high-rise residential units under Guangze•Amethyst City – Phase II which has increasing selling price in 2014; and (ii) the sales of remaining higher margin commercial units under Guangze•Amethyst City – Phase I with aggregate GFA of 2,430 sq.m.

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the gross profit of the Target Group increased by 101.5%, from RMB173,181,378 to RMB348,875,623; and gross profit margin from 27.3% to 43.1%. The increase in gross profit and gross profit margin was mainly resulted from the sales recognised in respect of certain shops at Guangze International Shopping Centre where the margin is approximately 70% which is higher than the margin of residential properties sold in the previous corresponding period. Also, there was an increase in the margin of commercial property sales in respect of Guangze•Amethsyt City where its average unit price increased from RMB9,971 per sq.m. to RMB11,037 per sq.m..

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Other revenue and other income

– Bank interest income 665,616 96.2 2,002,795 99.5 727,709 52.8 421,567 43.1 163,658 0.7 – Government grants – – – – – – – – 21,493,196 96.9 – Gain on disposal of property, plant and equipment – – – – – – – – 457,606 2.1 – Sundry income 26,347 3.8 9,457 0.5 650,708 47.2 555,555 56.9 57,341 0.3

Total 691,963 100.0 2,012,252 100.0 1,378,417 100.0 977,122 100.0 22,171,801 100.0

For the year ended 31 December 2012

For the year ended 31 December 2012, the other revenue and other income of the Target Group amounted to RMB691,963, which consisted of bank interest income and sundry income. The bank interest income of the Target Group for the year ended 31 December 2012 were RMB665,616, representing 96.2% of the other revenue and other income respectively. The sundry income of the Target Group was RMB26,347, representing 3.8% of the other revenue and other income.

For the year ended 31 December 2013

For the year ended 31 December 2013, the other revenue and other income of the Target Group amounted to RMB2,012,252, which consisted of bank interest income and sundry income.

The bank interest income of the Target Group for the year ended 31 December 2013 was RMB2,002,795, representing an increase of RMB1,337,179, or approximately 200.9% compared to that of 2012. The significant increase was mainly due to the significant increase in average bank balance during 2013 as compared to 2012.

For the year ended 31 December 2014

For the year ended 31 December 2014, the other revenue and other income of the Target Group amounted to RMB1,378,417, of which comprise bank interest income of approximately RMB727,709 and sundry income of RMB650,708. The significant decrease in other revenue and other income was primarily due to the drop in bank interest income by approximately RMB1,275,086, or approximately 63.7% compared to that of 2013. The decrease in the bank interest income was mainly attributable to the decrease in average bank balance in 2014 as compared to 2013.

Sundry income mainly represented the government subsidies of RMB500,000 for the year ended 31 December 2014 which was awarded to the Target Group for its contribution to the local economy in Jilin City.

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For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the other revenue and other income of the Target Group amounted to RMB22,171,801, which comprise government grants of approximately RMB21,493,196, gain on disposal of fixed assets of RMB457,606, bank interest income of RMB163,665 and sundry income of RMB57,334. The government grants were related to the financial subsidies granted by local government at Baishan City for the development of Guangze International Shopping Centre locally.

The gain on disposal of fixed assets represented the disposal of a motor vehicle previously held by the Target Group.

Selling and marketing costs

– Advertising and promotion expenses 11,145,535 47.4 17,188,275 57.4 16,595,406 57.8 6,936,985 47.2 4,262,445 35.4 – Heating fee 4,784,578 20.4 4,021,450 13.4 2,016,321 7.1 2,001,274 13.6 489,317 4.0 – Staff cost 4,031,896 17.1 3,794,373 12.7 5,856,895 20.4 4,291,185 29.2 5,976,338 49.6 – Others 3,553,859 15.1 4,947,390 16.5 4,222,121 14.7 1,470,723 10.0 1,323,235 11.0

Total 23,515,868 100.0 29,951,488 100.0 28,690,743 100.0 14,700,167 100.0 12,051,335 100.0

For the year ended 31 December 2012

For the year ended 31 December 2012, the selling and marketing costs of the Target Group amounted to RMB23,515,868, which consisted of advertising and promotion expenses, heating fee, staff cost and other costs. The total advertising and promotion expenses of the Target Group for the year ended 31 December 2012 was RMB11,145,535, representing 47.4% of the selling and marketing costs for the year ended 31 December 2012. The advertising and promotion expenses was mainly related to the advertisement expenses of RMB7,402,010 and RMB2,912,760 for the Guangze•Amethyst City and Guangze International Shopping Centre respectively..

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For the year ended 31 December 2013

For the year ended 31 December 2013, the selling and marketing costs of the Target Group amounted to RMB29,951,488, representing an increase of 27.4% as compared to that of last year. The significant increase was resulted from the rapid growth in advertising and promotion expenses which was attributable to additional promotion and advertising activities incurred in respect of Guangze•Tudors Palace and Guangze•Amethyst City – Phase II.

For the year ended 31 December 2014

For the year ended 31 December 2014, the selling and marketing costs of the Target Group amounted to RMB28,690,743, representing a decrease of 4.2% as compared to that of last year. Among the four main cost categories of the selling and marketing costs, advertising and promotion expenses decreased by 3.4% and staff cost increased by 54.4% compared to that of 2013. The slight decrease in advertising and promotion expenses was mainly attributable to the commencement of advertising and promotion activities on the new project of Guangze Red House and was offset by the reduction of advertising and promotional activities for projects in Jilin City as compared to that in 2013. The increase in staff costs from RMB3,794,373 to RMB5,856,895 was mainly attributable to the increase in number of staff in the sales and marketing team in Yanji City and Fusong County in the preparation of Guangze Red House and Changbaishan Ground Pine Township International Resort. The heating fee significantly reduced by 49.9%, as the heating fee was borne by property buyers upon delivery of properties.

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the selling and marketing costs of the Target Group amounted to RMB12,051,335, representing an decrease of 18.0% as compared to the corresponding period in last year. Such decrease was primarily contributed by the decrease in advertising and promotion expenses and heating fee by 38.6% and 75.5%. The decrease in advertising and promotion expenses was caused by the reduction of advertising and promotional activities on existing projects and given that there was no new project launch during this period. The decrease in heating fee was mainly as a result of more property buyers who bear the heating fee upon delivery of more properties during the period.

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Administrative expenses

– Cleaning expenses 1,266,193 3.8 3,387,041 7.4 2,717,703 6.4 1,582,486 5.9 1,244,686 3.8 – Depreciation charge 1,571,912 4.7 2,299,286 5.0 2,961,780 6.9 1,770,071 6.6 868,814 2.6 – Entertainment expenses 1,414,493 4.2 2,036,859 4.4 1,892,354 4.4 1,141,944 4.2 1,151,088 3.5 – Office consumables 826,946 2.5 985,652 2.2 1,013,822 2.4 359,949 1.3 261,046 0.8 – Office expenses 1,653,512 5.0 1,530,375 3.3 1,681,921 3.9 1,126,675 4.2 242,030 0.7 – Travelling expenses 1,531,578 4.6 1,750,587 3.8 2,433,646 5.7 1,795,860 6.7 780,544 2.4 – Electricity bill 505,076 1.5 899,217 2.0 1,231,225 2.9 812,707 3.0 1,418,153 4.3 – Other taxes and professional fees 3,001,094 9.0 4,986,311 10.9 4,035,580 9.5 2,295,228 8.5 3,552,739 10.7 – Staff cost 16,359,995 49.0 20,370,150 44.5 20,152,055 47.1 13,046,083 48.3 14,842,009 44.9 – Others 5,243,581 15.7 7,539,489 16.5 4,629,501 10.8 3,065,548 11.3 8,730,592 26.3

Total 33,374,380 100 45,784,967 100 42,749,587 100 26,996,551 100 33,091,701 100

For the year ended 31 December 2012

For the year ended 31 December 2012, the general and administrative expenses of the Target Group amounted to RMB33,374,380, which consisted of cleaning expenses, depreciation charge, business entertainment expenses, repair cost, office supplies cost, administrative expenses, travelling expenses, electricity bill, other tax expenses, staff cost and other costs. The total staff cost of the Target Group for the year ended 31 December 2012 was RMB16,359,995, representing 49.0% of the general and administrative expenses.

For the year ended 31 December 2013

For the year ended 31 December 2013, the general and administrative expenses of the Target Group amounted to RMB45,784,967, representing an increase of 37.2% compared to 2012. The significant increase was mainly attributable to the growth in staff cost from RMB16,359,995 for the year ended 31 December 2012 to RMB20,370,150 for the year ended 31 December 2013, representing an increase of RMB4,010,155, or approximately 24.5%, due to increase in the number of staff arising from (i) new projects on Guangze Red House and Guangze China House; and (ii) the creation of a property management service team for Guangze•Amethyst City.

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For the year ended 31 December 2014

For the year ended 31 December 2014, the general and administrative expenses of the Target Group amounted to RMB42,749,587, representing a decrease of 6.6% compared to 2013. The decrease in general and administrative expenses was mainly attributable to (i) the one-off cleaning expenses of RMB0.7 million incurred in 2013 before the delivery of certain property units of Guangze•Amethyst City – Phase II; and (ii) decrease in other general and administrative expenses of RMB2.9 million owing to more effective cost central management implemented by the Target Group’s senior management.

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the general and administrative expenses of the Target Group amounted to RMB33,091,701, representing an increase of 22.6% as compared to the corresponding period in 2014. The increase was contributed by the increase in staff costs by RMB1.8 million as a result of an increase in the number of staff members on the property management team for managing Guangze International Shopping Centre; and (ii) increase in electricity expenses of RMB0.6 million attributable to more electricity has been used on Guangze International Shopping Centre since its opening in January 2015.

Finance cost

For the eight months ended For the year ended 31 December 31 August 2012 2013 2014 2014 2015 Increase/ Increase/ Increase/ Amount Amount (Decrease) Amount (Decrease) Amount Amount (Decrease) (RMB) (RMB) (%) (RMB) (%) (RMB) (RMB) (%)

– Interests on loans 37,073,047 44,293,224 19.5 73,449,072 65.8 56,130,465 44,364,873 (21.0) Less: Borrowings costs capitalised into properties under development and investment properties (35,093,124) (43,818,750) 24.9 (45,803,447) 4.5 (36,590,624) (2,812,260) (92.3)

Total 1,979,923 474,474 (76.0) 27,645,625 5,726.6 19,539,841 41,552,613 112.7

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For the year ended 31 December 2012

For the year ended 31 December 2012, the interests on loans of the Target Group amounted to RMB37,073,047, which mainly consisted of interests expenses of RMB36,687,568 and bank charges of RMB385,479. The interests expenses incurred by the Target Group for the year ended 31 December 2012, represented 99.0% of the interests on loans and the bank charges of RMB385,479 represented 1.0% of the interests on loans. The interests were mainly related to loans specifically borrowed for the construction of Guangze•Amethyst City – Phase II. The interests were therefore capitalised into properties under development in accordance with the relevant accounting standards in Hong Kong. Bank charges are related to handling fee charged by bank for property buyers making payments by bank card using the point-of-sale system in respect of pre-sales of Guangze•Amethyst City.

For the year ended 31 December 2013

For the year ended 31 December 2013, the interests on loans of the Target Group amounting to RMB44,293,224 including bank charges of RMB474,474 for the handling fee payable to the bank on the point-of-sale system. The increase in interests on loans was mainly attributable to the addition of new bank loans issued for the construction of Guangze International Shopping Centre.

For the year ended 31 December 2014

For the year ended 31 December 2014, the interests on loans of the Target Group amounted to RMB73,449,072, which included bank charges of RMB483,335. The interest expenses were related to the bank loan specifically for the purpose of the development of Guangze•Amethyst City – Phase II and Guangze International Shopping Centre. The increase in the interests on loans was attributable to the full-year interest charged on the new loan for Guangze International Shopping Centre. Interests of RMB27,162,290 were charged to profit or loss as Guangze•Amethyst City project construction completed and subsequent interests incurred were no longer qualified for capitalisation.

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the interests on loans of the Target Group amounted to RMB44,364,872, representing a decrease of 21.0% compared to the corresponding period of last year. The finance costs were mainly related to interest expenses incurred in relation to the bank loan issued for the development of Guangze•Amethyst City – Phase II and Guangze International Shopping Centre. As the construction of the properties in Phase II were completed in 2013 and Guangze International Shopping Centre in 2014, the interest expenses were no longer capitalised; and instead charged to profit or loss in 2015. The decrease was mainly attributable to the decrease in average loan balance during the period as a result of loan repayment made.

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Other operating expenses

– Donations 1,250,000 99.2 550,500 97.6 570,000 46.5 – – 20,000 4.0 – Loss from disposal of fixed assets – – – – 68,489 5.6 – – – – – Compensation – – – – 497,757 40.7 130,745 79.5 480,057 96.0 – Others 10,000 0.8 13,820 2.4 88,038 7.2 33,772 20.5 – –

Total 1,260,000 100.0 564,320 100.0 1,224,284 100.0 164,517 100.0 500,057 100.0

For the year ended 31 December 2012

For the year ended 31 December 2012, the other expenses of the Target Group amounted to RMB1,260,000 which were nearly all donations. The donations of the Target Group for the year ended 31 December 2012 were RMB1,250,000, representing 99.2% of the other expenses. The donations represented monies donated to certain educational institutions and charitable organisations.

For the year ended 31 December 2013

For the year ended 31 December 2013, the other expenses of the Target Group amounted to RMB564,320, which were nearly all donations. The donations of the Target Group for the year ended 31 December 2013 were RMB550,500, representing 97.6% of the other expenses. The donations represented monies donated to certain educational institutions.

For the year ended 31 December 2014

For the year ended 31 December 2014, the other expenses of the Target Group amounted to RMB1,224,284, which primarily consisted of donations, loss from disposal of fixed assets and compensations. The donations, loss from disposal of fixed assets and compensations of the Target Group for the year ended 31 December 2014 were respectively RMB570,000, RMB68,489 and RMB497,757, representing 46.5%, 5.6% and 40.7% of the other expenses. The donations represented monies donated to certain educational institutions. The loss from disposal of fixed assets represented the disposal of the Target Group’s certain motor vehicles. The compensations represented compensation of RMB497,757 made to property buyers in addition to refunds as stated in the sale and purchase contracts by Jilin Zhujia. For details, please refer to section headed “Historical Non-compliance Incidents” in the Business section of this Circular.

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For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the other expenses included compensation made to customers of (i) RMB170,000 in addition to refunds as stated in the sale and purchase contract on a property project, and (ii) RMB310,000 for measurement difference upon delivery of properties to purchasers.

Income tax expenses

Income tax expenses – Current tax – PRC Enterprise Income Tax 20,130,463 33.3 21,634,997 72.6 36,075,888 63.2 33,931,396 65.4 43,818,956 30.9 – PRC Land Appreciation Tax 12,659,008 21.0 – – – – – – 87,341,222 61.7 – Deferred taxation – Benefit of tax losses (recognised)/reversed (3,178,769) (5.3) (5,991,572) (20.1) (16,962,490) (29.7) (11,624,691) (22.4) 6,075,902 4.3 – Valuation gain 30,794,016 51.0 14,168,287 47.5 37,987,050 66.5 29,562,031 57.0 4,432,902 3.1

Total 60,404,718 100.0 29,811,712 100.0 57,100,448 100.0 51,868,736 100.0 141,668,982 100.0

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Reconciliation of tax expense

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Profit before tax 201,120,829 120,769,899 257,352,397 231,005,545 301,583,326

PRC Enterprise Income Tax at applicable tax rate of 25% 50,280,207 30,192,475 64,338,099 57,751,386 75,395,832 PRC Land Appreciation Tax 12,659,008 – – – 87,341,222 PRC Land Appreciation Tax deductible for PRC Enterprise Income Tax purposes (3,164,752) – – – (21,835,306) Tax effect of expenses not deductible for tax purpose 682,153 69,530 2,850,694 – 2,731,745 Tax effect of income not taxable for tax purpose (244,724) (450,599) (218,594) – (5,517,609) Recognition of previously unrecognised deferred tax assets – – (10,278,759) (9,969,674) (1,923,443) Unrecognised tax losses 192,826 306 409,008 4,087,024 5,476,541

Tax expense for the year/period 60,404,718 29,811,712 57,100,448 51,868,736 141,668,982

Effective tax rate 30.0% 24.7% 22.2% 22.5% 47.0%

PRC Enterprise Income Tax (“EIT”) has been provided for the years ended 31 December 2012, 31 December 2013 and 31 December 2014 and the eight months ended 31 August 2014 and 2015 based on the estimated assessable profits in accordance with the relevant tax laws applicable to the Target Group in the PRC. The statutory EIT tax rate in the PRC is 25% for the Relevant Periods and the eight months ended 31 August 2014.

PRC Land Appreciation Tax (“LAT”) is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds from sale of properties less deductible expenditures including land acquisition costs, borrowing costs and other property development expenditures. The Target Group has estimated and made a provision for LAT according to the requirements set forth in the relevant PRC tax laws and regulations. The LAT provision is subject to the final review/approval by the local tax bureau.

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For the years ended 31 December 2012 and 2013, the effective tax rates were 30.0% and 24.7%. The decrease of effective tax rate for the year ended 31 December 2014 from 24.7% to 22.2% was mainly attributable to the recognition of deferred tax assets in respect of prior years’ losses of RMB10.3 million. Had these deferred tax assets been excluded, the adjusted effective tax rate would have been 26.2%.

For the eight months ended 31 August 2015, the effective tax rate was 47.0%, representing an increase of 24.5%, which was mainly due to the higher ratio of the land appreciation on the sales of property units at Guangze International Shopping Centre resulting in higher land appreciation tax charged on a progressive basis. Also, for the eight months ended 31 August 2015, included in the tax reconciliation was a tax effect of income not taxable for tax purpose which represented the government grant income received in 2013 and 2014.

Profit for the year and net profit margin

For the year ended 31 December 2012

For the year ended 31 December 2012, the net profit of the Target Group (excluding changes in fair value of investment properties and related deferred tax) was RMB48,334,064 and the net profit margin (excluding changes in fair value of investment properties and related deferred tax) was 9.1%.

For the year ended 31 December 2013

For the year ended 31 December 2013, the net profit of the Target Group (excluding changes in fair value of investment properties and related deferred tax) was RMB48,453,325, representing a decrease of RMB119,262, or approximately 0.2% as compared to that of last year. The net profit margin decreased from 9.1% in 2012 to 8.8% in 2013 which was due primarily to the increase in (i) advertising and promotion expenses of RMB3,024,985 for pre-sales of Guangze • Tudors Palace which is low-rise connected townhouse; and (ii) staff costs for the new property development projects of Guangze Red House and Guangze China House.

For the year ended 31 December 2014

For the year ended 31 December 2014, the net profit of the Target Group (excluding changes in fair value of investment properties and related deferred tax) was RMB86,290,796, representing an increase of RMB37,837,471, or approximately 78.1% as compared to that of last year. The net profit margin increased from 8.8% in 2013 to 10.7% in 2014 which was due primarily to the recognition of sales of high rise units under Guangze•Amethyst City – Phase II and all types of residential units (including low-, mid- and high-rise) under Guangze•Amethyst City – Phase I with a higher selling price compared to that of 2013.

– 306 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP

For the eight months ended 31 August 2015

For the eight months ended 31 August 2015, the net profit of the Target Group (excluding changes in fair value of investment properties and related deferred tax) was RMB146,615,638, representing an increase of RMB56,164,920, or 62.1% as compared to the corresponding period in last year. The net profit margin increased from 14.2% to 18.1%. Such a significant increase was primarily attributable to the sales recognised in relation to the commercial properties of Guangze International Shopping Centre with gross margin of approximately 70%. Also, the Target Group recognised the government subsidy income of RMB21,493,196 during the eight months ended 31 August 2015 upon the completion and delivery of certain property units of Guangze International Shopping Centre.

LIQUIDITY AND CASH RESOURCES

Property development requires substantial capital investment for land acquisition and construction. To date the Target Group has funded its operations principally from cash generated from its operations, mainly including proceeds from pre-sales and sales of the properties, as well as bank loans and borrowings from financial institutions.

Cash flow

For the eight months ended For the year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB

Selected cash flow statement data Net cash generated from (used in) operating activities 25,350,100 (347,277,129) 88,677,761 251,492,115 (52,964,161) Net cash used in investing activities (74,875,574) (94,416,380) (147,149,447) (78,884,781) (3,875,308) Net cash generated from (used in) financing activities 253,734,120 297,724,000 (24,797,557) (102,714,769) 181,144,188

Net increase/(decrease) in cash and cash equivalents 204,208,646 (143,969,509) (83,269,243) 69,892,565 124,304,719 Cash and cash equivalent at the beginning of the year/period 36,632,953 240,841,599 96,872,090 96,872,090 13,602,847

Cash and cash equivalents at the end of the year/period 240,841,599 96,872,090 13,602,847 166,764,655 137,907,566

– 307 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP

Net cash generated from (use in) operating activities

For the year ended 31 December 2012

In 2012, the Target Group’s net cash generated from operating activities was RMB25.4 million, mainly attributable to profit before tax of RMB77.9 million (excluding changes in fair value of investment properties) in connection with its contracted sales of properties, and cash generated from other operating activities of RMB5 million, mainly including changes in working capital, offset by (i) cash paid to banks of RMB37 million for the interest of interest-bearing loans, (ii) cash paid for PRC land appreciation taxes of RMB15 million, and (iii) cash paid for PRC corporate income tax of RMB6 million.

For the year ended 31 December 2013

In 2013, the Target Group’s net cash used in operating activities was RMB347.3 million. This net cash used in operating activities was mainly attributable to profit before tax of RMB64.1 million (excluding changes in fair value of investment properties) in connection with its contracted sales of properties, offset by (i) cash used in other operating activities of RMB338.8 million, mainly including changes in working capital, which increased significantly compared to 2012 as the Target Group had more property projects developed which needed a large amount of working capital, (ii) cash paid to banks of RMB44 million for the interest on interest-bearing loans, (iii) cash paid for PRC Land Appreciation Tax of RMB27 million, and (iv) cash paid for PRC Enterprise Income Tax of RMB2 million.

For the year ended 31 December 2014

In 2014, the Target Group’s net cash generated from operating activities was RMB88.7 million. This net cash generated from operating activities was mainly attributable to profit before tax of RMB105.4 million (excluding changes in fair value of investment properties) in connection with its contracted sales of properties, and cash generated from other operating activities of RMB94.8 million, mainly including changes in working capital, which turned around compared to 2013 as the Target Group had a large amount of restricted bank deposits that were released, partially offset by (i) cash paid to banks of RMB73 million for the interest of interest-bearing loans, (ii) cash paid for PRC Land Appreciation Tax of RMB21 million, and (iii) cash paid for PRC Enterprise Income Tax of RMB18 million.

For the eight months ended 31 August 2015

During the eight months ended 31 August 2015, the Target Group’s net cash used in operating activities was RMB53.0 million, which was mainly attributable to profit before tax of RMB283.9 million (excluding changes in fair value of investment properties) in connection with its contracted sales of properties, offset by (i) cash used in other operating activities of RMB329.8 million, (ii) cash paid to banks of RMB35.3 million for the interest on interest-bearing loans, (iii) cash paid for PRC land appreciation tax of RMB6.4 million, and (iv) cash paid for PRC Enterprise Income Tax of RMB7.9 million.

– 308 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP

Net cash used in investing activities

For the year ended 31 December 2012

In 2012, the Target Group’s net cash used in investing activities was RMB75 million. This net cash used in investing activities was mainly attributable to (i) addition of properties of RMB74 million and (ii) the payment for purchases of property, plant and equipment of RMB2 million, partially offset by interest received of RMB1 million.

For the year ended 31 December 2013

In 2013, the Target Group’s net cash used in investing activities was RMB94 million. This net cash used in investing activities was mainly attributable to (i) addition of properties of RMB88 million and (ii) the payment for purchases of property, plant and equipment of RMB8 million, partially offset by interest received of RMB2 million.

For the year ended 31 December 2014

In 2014, the Target Group’s net cash used in investing activities was RMB147 million. This net cash used in investing activities was mainly attributable to the addition of properties of RMB145 million, and net cash outflow from the merger for common control combinations of RMB2 million.

For the eight months ended 31 August 2015

During the eight months ended 31 August 2015, the Target Group’s net cash used in investing activities was RMB3.9 million which was mainly related to additional expenditure made on commercial properties of Guangze International Shopping Centre of RMB3.3 million.

Net cash generated from/(used in) financing activities

For the year ended 31 December 2012

In 2012, the Target Group’s net cash generated from financing activities was RMB253.7 million. The net cash generated from financing activities was mainly attributable to proceeds from loans and borrowings of RMB500 million and issue of paid-up capital of RMB90 million, partially offset by repayments of loans and borrowings of RMB210 million, and net repayment of advance from/to related companies and non-controlling interest of RMB126.3 million.

For the year ended 31 December 2013

In 2013, the Target Group’s net cash generated from financing activities was RMB297.7 million. The net cash generated from financing activities was mainly attributable to proceeds from bank loans and borrowings from financial institutions of RMB312.4 million, partially offset by net repayment of advance from related companies and non-controlling interest of RMB14.7 million.

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For the year ended 31 December 2014

In 2014, the Target Group’s net cash used in financing activities was RMB24.8 million, which was mainly attributable to repayment of bank loans and borrowings from financial institutions of RMB335.8 million, offset by new net advance from related companies and non-controlling interest of RMB311.0 million.

For the eight months ended 31 August 2015

During the eight months ended 31 August 2015, the Target Group’s net cash generated from financing activities was RMB181.1 million primarily attributable to the offsetting effect of (i) net new loans of RMB255.8 million; (ii) dividend payment to previous equity holders of Ground Real Estate and non-controlling interests of 吉林省廣澤地產有限公司 of RMB180.6 million; (iii) capital injection of RMB200 million into Ground Real Estate by its shareholder and (iv) net repayment of advance from related companies and non-controlling interest of RMB52.0 million.

Working Capital

The Target Group’s estimated contracted capital expenditure with respect to its projects under development and/or projects held for future development as at 31 August 2015 is approximately RMB971.2 million, including approximately RMB827.9 million for construction costs for property development and RMB143.3 million for land premium.

The Target Group plans to finance its capital expenditure primarily through cash generated from our operations, mainly including proceeds from pre-sales and sales of its properties, as well as bank loans and borrowings from financial institutions. Proceeds from pre-sales form an integral source of its operating cash inflows. The Target Group may pre-sell properties after certain criteria are met and proceeds from pre-sales are regulated by local governments in some cities where the Target Group develop its property projects, such as Jilin City and Baishan City. Under the applicable rules and regulations of these local governments, such pre-sales proceeds shall be deposited into regulated accounts in banks designated by the local governments or the Target Group and primarily used for the construction and development of the relevant projects. For cities where proceeds from pre-sales are not subject to such regulations, proceeds from pre-sales are managed by its headquarters. The Target Group bank loans are primarily provided by major commercial banks in the PRC.

Taking into account the Target Group’s cash generated from its operations, presently available bank loans and other borrowings, the Directors, after due and careful inquiry, are of the view that the Target Group has sufficient available working capital for its present requirements for at least the 12 months following the date of this circular.

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Consolidated Statements of Financial Position

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Non-current assets Investment properties 197,000,000 342,000,000 639,000,000 660,000,000 Property, plant and equipment 6,207,688 11,237,522 8,495,886 8,920,997 Goodwill – – – 4,999,430 Deferred tax assets 3,593,242 9,584,814 26,780,696 20,704,794

206,800,930 362,822,336 674,276,582 694,625,221

Current assets Properties under development and completed properties held for sale 1,336,042,336 1,538,970,142 2,918,494,886 2,888,115,074 Other receivables 849,225,022 1,187,227,583 1,258,910,432 638,687,866 Prepaid income tax 27,344,656 46,512,568 67,638,481 41,758,662 Cash and bank balances 254,332,887 472,176,646 107,976,726 145,067,494

2,466,944,901 3,244,886,939 4,353,020,525 3,713,629,096

Current liabilities Trade and other payables 652,925,708 744,198,533 1,325,730,755 1,268,378,922 Deposits from sale of properties 1,344,381,781 1,728,767,629 1,578,771,823 950,060,579 Deferred income – – 55,005,000 33,511,804 Interest-bearing borrowings – 60,000,000 220,000,000 532,400,000 Tax payables – 12,486,297 31,597,252 122,542,609

1,997,307,489 2,545,452,459 3,211,104,830 2,906,893,914

Net current assets 469,637,412 699,434,480 1,141,915,695 806,735,182

Total assets less current liabilities 676,438,342 1,062,256,816 1,816,192,277 1,501,360,403

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As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Non-current liabilities Deferred income 2,210,000 30,502,000 1,040,000 1,040,000 Interest-bearing borrowings 300,000,000 552,400,000 306,600,000 250,000,000 Deferred tax liabilities 30,794,016 44,962,303 288,895,839 293,328,741

333,004,016 627,864,303 596,535,839 544,368,741

NET ASSETS 343,434,326 434,392,513 1,219,656,438 956,991,662

Capital and reserves Share capital – – 6 60,886 Reserves 264,113,684 331,648,817 852,731,137 751,923,509

Equity attributable to owners of the Target 264,113,684 331,648,817 852,731,143 751,984,395 Non-controlling interests 79,320,642 102,743,696 366,925,295 205,007,267

TOTAL EQUITY 343,434,326 434,392,513 1,219,656,438 956,991,662

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DESCRIPTION OF CERTAIN KEY ITEMS AFFECTING THE CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Investment Properties

As at As at 31 December 31 August 2012 2013 2014 2015 (RMB) (RMB) (RMB) (RMB)

Guangze International Shopping Centre 197,000,000 342,000,000 639,000,000 660,000,000

The investment properties held by the Target Group are classified as non-current assets. As at 31 August 2015, the Target Group’s investment properties had a total leasable area of 68,432.89 sq.m and were valued by an independent firm of professional property valuers at RMB660,000,000.

The significant increase in the value of the investment properties from 31 December 2012 to 31 August 2015 was attributable to (i) the additional costs incurred for the construction of Guangze International Shopping Centre; and (ii) the increase in fair value of the investment properties as a result of potential positive future changes in comparable market prices/market rental rates of International Guangze International Shopping Centre upon lease reversion.

Properties under development and completed properties held for sale

As at 31 December As at 31 August 2012 2013 2014 2015 (RMB) % (RMB) % (RMB) % (RMB) %

Properties under development 1,234,195,951 92.4 685,958,203 44.6 1,961,383,990 67.2 2,296,136,360 79.5 Completed properties held for sale 101,846,385 7.6 853,011,939 55.4 957,110,896 32.8 591,978,714 20.5

Total 1,336,042,336 100 1,538,970,142 100 2,918,494,886 100 2,888,115,074 100

The properties under development include costs of acquiring rights to use certain lands, which are located in the PRC for property development. Land use rights are held on leases of between 40 and 70 years. The amount of properties under development expected to be recovered after more than one year is RMB116,100,028, RMB272,848,759, RMB1,382,701,685 and RMB1,384,231,173 as at 31 December 2012, 2013, 2014 and 31 August 2015 respectively. All completed properties held for sale are located in the PRC and are stated at lower of cost and net realisable value. The unaudited balance of properties under development and completed properties held for sale as at 31 October 2015 is RMB2,978,613,519.

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Properties under development

As at 31 December 2012, the properties under development are mainly related to (i) Guangze•Amethyst City – Phase II; and (ii) Guangze International Shopping Centre – Residential portion, all of which commenced construction in 2012.

The decrease in properties under development from RMB1,234 million as at 31 December 2012 to RMB686 million as at 31 December 2013 is mainly attributable to the transfer of the properties under development to cost of sales (delivered portion) and completed properties for sale (undelivered portion) upon completion of construction of Guangze•Amethyst City – Phase II; offset by the continual development of (i) Guangze International Shopping Centre – Residential portion and the commencement of construction of Guangze•Tudors Palace.

The increase in properties under development from RMB686 million as at 31 December 2013 to RMB1,961 million as at 31 December 2014 is mainly attributable to (i) the commencement of construction of Guangze Red House; and (ii) pre-construction activities of Changbaishan Ground Pine Township International Resort; and (iii) the continual development of Guangze•Tudors Palace and Guangze China House, offset by the transfer of the properties under development to completed properties for sale upon completion of construction of Guangze International Shopping Centre – Residential portion.

The increase in properties under development from RMB1,961 million as at 31 December 2014 to RMB2,296 million as at 31 August 2015 was mainly attributable to the continual development/pre-development of (i) Guangze Red House, (ii) Guangze•Tudors Palace, and (iii) Changbaishan Ground Pine Township International Resort.

Completed properties held for sale

As at 31 December 2012, completed properties held for sale were mainly related to the unsold units of Guangze•Amethyst City – Phase I which completed construction in 2012.

The increase in completed properties held for sale from RMB102 million as at 31 December 2012 to RMB853 million as at 31 December 2013 was mainly attributable to the completion of Guangze•Amethyst City – Phase II.

The increase in completed properties held for sale from RMB853 million as at 31 December 2013 to RMB957 million as at 31 December 2014 was mainly attributable to the transfer of Guangze International Shopping Centre – Residential and commercial portion and Guangze China House from properties under development upon completion; and partially offset by the certain units of Guangze•Amethyst City – Phase I and Phase II being recognised in profit or loss upon delivery.

The decrease in completed properties for sale from RMB957 million as at 31 December 2014 to RMB592 million as at 31 August 2015 was mainly attributable to the property sales recognised on certain units of Guangze International Shopping Centre and sales of certain remaining units of Guangze•Amethyst City – Phase I and Phase II.

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Deposits from pre-sale of properties

Deposits from the pre-sale of properties mainly includes sales proceeds received from pre-sale of properties for sale. As at 31 December 2012, 2013 and 2014 and 31 August 2015, deposits received in respect of Guangze•Amethyst City and Guangze International Shopping Centre constituted 99.8%, 93.3%, 83.5% and 67.3% of the total balances, the decrease of which was attributable to the transfer of certain balances to cost of sales and completed properties for sales upon completion during the Track Record Period; and also attributable to deposits received for other property projects developed by the Target Group. The unaudited balance of deposits from pre-sale of properties as at 31 October 2015 in RMB996,985,240.

Cash and bank balances

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Cash and cash equivalents 240,841,599 96,872,090 13,602,847 137,907,566 Restricted bank deposits 13,491,288 375,304,556 94,373,879 7,159,928

Total cash and bank balances 254,332,887 472,176,646 107,976,726 145,067,494

In accordance with relevant documents issued by the PRC local State-Owned Land and Resource Bureau, the Target Group is required to place certain of the proceeds received from pre-sale of properties as guarantee deposits for construction of the properties. The restriction will be released upon the construction is completed or real estate ownership certificate of the pre-sold properties is issued, whichever is earlier. Restricted cash earns interest at floating daily bank deposit rates. The unaudited balance of bank cash and bank balances as at 31 October 2015 was RMB55,369,650. For details of cash and cash equivalents, please refer to the section headed “Liquidity and cash resources” in this section.

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Other receivables

Other Receivables

As at 31 December As at 31 August 2012 2013 2014 2015 RMB % RMB % RMB % RMB %

Amounts due from related companies: Ground Investment Holding (Group) Limited – – – – – – 153,327,966 24.0 Jilin Guangze Group Company Limited 482,489,165 56.8 609,505,165 51.3 727,703,115 57.8 – – Jilin Guangze Dairy Products Company Limited 7,670,000 0.9 13,820,000 1.2 13,820,000 1.1 3,360,000 0.5

Sub-total 490,159,165 57.7 623,325,165 52.5 741,523,115 58.9 156,687,966 24.5

Amount due from immediate holding company: Ka Yik Investment Limited – – – – 6 – 60,886 –

Amount due from a fellow subsidiary: Fusong Ground Real Estate Development Company Limited 72,270,000 8.5 – – – – – –

Land development expenditure 141,523,412 16.7 266,478,650 22.4 316,535,284 25.1 270,504,951 42.4 Prepaid land cost – – – – – – 27,000,000 4.2 Prepaid business tax and other taxes 68,901,910 8.1 81,352,235 6.9 94,454,478 7.5 60,825,751 9.5 Deposits for properties development 48,523,634 5.7 103,970,142 8.8 43,811,994 3.5 48,234,790 7.6 Other prepayments and receivables 27,846,901 3.3 112,101,391 9.4 62,585,555 5.0 75,373,522 11.8

Total 849,225,022 100 1,187,227,583 100 1,258,910,432 100 638,687,866 100

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The Target Group’s other receivables as at 31 December 2012, 2013 and 2014 and 31 August 2015 are mainly related to amounts due from related companies, which constituted 57.7%, 52.5%, 58.9% and 24.5% respectively. Also, included in the balances are land development expenditure and prepaid business tax and surcharge. The land development expenditure is related to monies advanced to government for the removal and demolition work on land which will be subsequently reimbursed by government upon the land auction.

The significant increase in the amounts due from related companies from RMB490.2 million at 31 December 2012 to RMB623.3 million at 31 December 2013 and RMB741.5 million at 31 December 2014 was mainly attributable to the advances made to the related companies. As at 31 August 2015, the balance decreased to RMB156.7 million. These balances are unsecured, interest free and have no fixed terms of repayment.

Included in other prepayments and receivables as at 31 December 2013 are advances of RMB87.8 million made to Wan Sheng, an Independent Third Party, for the payment of land development. Part of the amount was settled during 2014. The unaudited balance of other receivables as at 31 October 2015 is RMB606,151,055.

Trade and Other Payables

Trade payables

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

To third Parties 183,293,996 166,335,329 401,683,222 541,303,663

The trade payables represent the amounts payable to third parties in relation to the construction and development of the Target Group’s properties. The decrease in the balances from RMB183,293,996 at 31 December 2012 to RMB166,335,329 at 31 December 2013 and a subsequent increase to RMB401,683,222 at 31 December 2014 was mainly attributable to the increase in the number of property development projects under progress over the years. The increase in balance from RMB401,683,222 at 31 December 2014 to RMB541,303,663 at 31 August 2015 was mainly due to settlement made during the period.

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Other payables

As at 31 December As at 31 August 2012 2013 2014 2015 RMB % RMB % RMB % RMB %

Amounts due to related companies: Ground Investment Holding (Group) Limited 143,376,000 30.5 195,330,000 33.8 598,712,373 64.8 340,000,000 38.5 Jilin Guangze Group Company Limited – – 19,266,000 3.3 50,000,000 5.4 – – Baishan Ground Business Management Company Limited – – – – 4,969,000 0.5 – – Jilin Dongxiu Investment Company Limited – – – – – – 30,000,000 8.3 Changchun Dongxiu Investment Company Limited – – – – – – 30,000,000 8.3 Charm Success Group Limited – – – – 103,116 – 933,041 0.1

East Gain Secretarial Services Limited – – – – 11,898 – 12,386 – Amount due to non-controlling shareholders: Jilin Ground Equity Investment Fund Joint Venture (Limited Partnership) 159,500,000 34.1 134,500,000 23.5 124,500,000 13.6 140,500,000 19.3

Sub-total 302,876,000 64.5 349,096,000 60.4 778,296,387 84.2 541,445,426 74.5

Deposits received from government 148,626,315 31.6 98,053,172 17.0 96,758,703 10.5 107,736,605 14.8 Other deposits received 234,062 – 1,974,309 0.3 5,553,920 0.6 10,965,535 1.5 Deed tax payable 4,069,796 0.9 22,284,570 3.9 22,180,436 2.4 19,314,838 2.7 Property maintenance fund 7,321,306 1.6 12,990,918 2.2 8,850,098 1.0 5,824,537 0.8 Receipt in advance from management services 1,290,031 0.3 5,514,115 1.0 4,799,515 0.5 7,222,062 1.0 Interest payable – – – – – – 9,084,384 1.2 Others 5,214,202 1.1 87,950,120 15.2 7,608,474 0.8 25,481,872 3.5

Total 469,631,712 100.0 577,863,204 100.0 924,047,533 100.0 727,075,259 100.0

The Target Group’s other payables as at 31 December 2012, 2013 and 2014 and 31 August 2015 are mainly related to: (i) amounts due to related companies; (ii) amounts due to Jilin Ground Equity Investment Fund Joint Venture (Limited Partnership); and amount due to non-controlling shareholders, which, in aggregate, constituted 64.5%, 60.4%, 84.2% and 74.5% of the total other payable balances respectively. Also, included in the balances are deposits received from government, deed tax payable and property maintenance fund. Deposits received from governments are monies received from government to assist for the removal of existing buildings and infrastructure on behalf of government.

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The significant increase in the balance from RMB302.9 million at 31 December 2012 to RMB349.1 million at 31 December 2013 and RMB778.3 million at 31 December 2014 was mainly attributable to the development cost payments made by the Target Group’s related companies on behalf of the Target Group. The decrease in the balance as at 31 August 2015 as compared to 31 December 2014 was attributable to the settlement of the amounts due and new balances with Jilin Dongxiu and Changchun Dongxiu amounted to RMB60,000,000 each which related to consideration payable in respect of the acquisition of Ground Real Estate from Jilin Dongxiu and Changchun Dongxiu during the eight months ended 31 August 2015.

Others as at 31 December 2013 included an advance of RMB69,600,000 made from 長春鼎固物資經銷有限公司, an independent third party, which was unsecured and interest free. The entire balance was repaid during the year ended 31 December 2014. The unaudited balance of other payable as at 31 October 2015 is RMB718,949,277.

Outstanding amount due to related parties of RMB549.6 million would be settled prior to the completion of the Acquisition.

Prepaid income tax/tax payables

Prepaid income tax represents PRC Enterprise Income Tax paid in respect of property projects pre-sold that is calculated in accordance with the rules and regulations adopted by the local tax bureau in Jilin Province. Tax payables represents provision for PRC Enterprise Income Tax made on taxable profits arising from property projects with recognised sales.

The increase in prepaid income tax of RMB19.2 million from the year ended 31 December 2012 to the year ended 31 December 2013 and RMB21.1 million to the year ended 31 December 2014 was attributable to the pre-sales of Guangze•Amethyst City Phases I and II and Guangze International Shopping Centre. The decrease in the prepaid income tax by RMB25.9 million as at 31 August 2015 was attributable to a combined effect of additional prepaid income tax in respect of Guangze China House and Guangze Red House and the prepaid income tax in respect of Guangze•Amethsyt City Phases I and II being transferred to income tax expenses under income statements upon the related sales recognition.

Accordingly, the provision for PRC Enterprise Income Tax of RMB12.5 million as at 31 December 2013 and RMB27.2 million as at 31 December 2014 was related to net tax payable balance in respect of Guangze•Amethyst City Phases I and II; and provision of RMB122.5 million was mainly related to Guangze International Shopping Centre. The unaudited balance of prepaid income tax and tax payables as at 31 October 2015 are RMB46,631,886 and RMB122,957,494 respectively.

Deferred Income – government grant

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Total 2,210,000 30,502,000 56,045,000 34,551,804

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The deferred income represents financial subsidies granted and received from local government, which there were no unfulfilled conditions relating to the grants. During the Track Record Period, Ground Real Estate Group received financial subsidies from the local government of Baishan City for the development and construction of Guangze International Shopping Centre. During the eight months ended 31 August 2015, portion of the financial subsidies were recognised under other revenue upon delivery of certain residential and commercial units of Guangze International Shopping Centre. The unaudited balance of deferred income as at 31 October 2015 is RMB29,178,505.

Net current assets

The current assets primarily of properties under development and completed properties held for sale, other receivables, prepaid income tax and cash and bank balances. Our current liabilities consist primarily of trade and other payables, deposits from sales of properties, deferred income, interest-bearing borrowings and tax payables. Ground Real Estate Group had net current assets of RMB469.6 million, RMB699.4 million, RMB1,141.9 million, RMB806.7 million and RMB759 million as at 31 December 2012, 31 December 2013, 31 December 2014, 31 August 2015 and 31 October 2015.

Commitments

The Target Group’s outstanding commitments as at 31 December 2012, 2013 and 2014 and 31 August 2015 are detailed as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Expenditure in respect of the properties development – Contracted for 1,023,490,693 951,899,354 942,493,513 971,164,321

As at 31 December 2012, approximately 72.4% of the outstanding commitments related to Guangze•Amethyst City – Phase II and approximately 26.5% to Guangze International Shopping Centre.

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The decrease in the commitment balance from RMB1,023.5 million as at 31 December 2012 to RMB951.9 million as at 31 December 2013 and further increase to RMB942.5 million as at 31 December 2014 was primarily attributable to the development cost payments made in respect of Guangze•Amethyst City – Phase II and Guangze International Shopping Centre; and partially offset by new contracts entered in respect of Guangze China House, Guangze Red House, both of which commenced construction in 2014 and Changbaishan Ground Pine Township International Resort which is expected to commence construction in third quarter of 2015.

The increase in the commitment balance from RMB942.5 million as at 31 December 2014 to RMB971.2 million as at 31 August 2015 was mainly attributable to the new main building construction contracts entered in respect of Guangze Red House.

OPERATING LEASE COMMITMENTS

The Target Group as lessor

The Target Group generally leases out the investment properties under operating lease arrangements with leases negotiated from terms ranging from three to five years. The terms of leases generally require the tenants to pay security deposits.

At the end of each of the Relevant Periods, the Target Group had total future minimum lease receivables under non-cancellable operating leases with the tenants falling due as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Within one year – – 3,732,933 14,124,667 In the second to fifth years inclusive – – 3,764,933 30,095,162 After five years – – 467,729 75,274,652

– – 7,965,595 119,494,481

The Target Group as lessees

The Target Group had entered into a number of Management Agreements with the its commercial properties purchasers in respect of the leasing of certain of commercial properties owned by them. Pursuant to the payment term of these agreements, the Target Group should pay fixed rate of the selling prices of properties during the lease term. These leases are classified as operating leases and have remaining lease terms of sixty-nine months as at 31 August 2015.

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At the end of each of the Relevant Periods, the Target Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Within one year – – – 25,505,995 In the second to fifth years inclusive – – – 102,023,960 After five years – – – 10,132,533

– – – 137,662,488

STATEMENT OF INDEBTEDNESS

The Target Group’s bank and other borrowings and the range of effective interest rates as at 31 December 2012, 31 December 2013 and 31 December 2014, 31 August 2015 and 31 October 2015 are as follows:

As at As at As at 31 December 31 August 31 October 2012 2013 2014 2015 2015 RMB RMB RMB RMB RMB

Amount repayable: Within one year – 60,000,000 220,000,000 532,400,000 532,400,000 After one year but within two years – 220,000,000 306,600,000 200,000,000 200,000,000 After two years but within five years 300,000,000 332,400,000 – 50,000,000 50,000,000

300,000,000 612,400,000 526,600,000 782,400,000 782,400,000

As at 31 December As at 31 August 2012 2013 2014 2015 (RMB) % (RMB) % (RMB) % (RMB) %

– Secured 300,000,000 100 600,000,000 98.0 514,200,000 97.6 730,000,000 93.3 – Unsecured – – 12,400,000 2.0 12,400,000 2.4 52,400,000 6.7

Total 300,000,000 100 612,400,000 100 526,600,000 100 782,400,000 100

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The increase in interest bearing borrowings from 31 December 2012 to 31 December 2013 was attributable to the new loans obtained for the construction of (i) Guangze International Shopping Centre; and (ii) Guangze•Amethyst City – Phase II.

The decrease in interest bearing borrowings from 31 December 2013 to 31 December 2014 was attributable to the repayment of loans amounting to RMB85,800,000 in accordance with the payment schedule of the relevant loan agreements.

The increase in interest bearing borrowings from 31 December 2014 to 31 August 2015 was attributable to the new loans of RMB340,000,000 for the purpose of the development of Changbaishan Ground Pine Township International Resort and repayment of loans of RMB84,200,000 in accordance with the payment schedule of the relevant loan agreements.

The carrying amount of non-current and current assets pledged to banks and to secure banking facilities granted to the Target Group is as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Investment properties 197,000,000 342,000,000 639,000,000 660,000,000 Properties under development 452,935,245 342,075,951 342,075,951 342,075,951

649,935,245 684,075,951 981,075,951 1,002,075,951

Treasury Policies

During the Track Record Period, the Target Group primarily financed its working capital through (i) internal funds; (ii) interest-bearing borrowings; and (iii) advances from related companies.

Foreign exchange exposure

As at 31 December 2012, 2013 and 2014 and 31 August 2015, the Target Group did not have any foreign exchange exposure as the entire Target Group’s operation was within the PRC.

Significant investment held

As at 31 December 2012, 2013 and 2014 and 31 August 2015, the Target Group did not have any significant investment.

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Material acquisitions

Save as disclosed in the section headed “Details of the reorganisation” under “History and Reorganisation of the Target Group”, the Target Group did not have any other material acquisitions during the Track Record Period.

Contingent Liabilities

The Target Group arranged bank financing for certain purchasers of the Target Group’s property units and provided guarantees to secure obligations of such purchasers for repayments. As at 31 December 2012, 2013 and 2014 and 31 August 2015, guarantees amounting to RMB6,044,623, RMB13,966,184, RMB12,456,140 and RMB5,203,120 respectively are given to banks with respect to loans procured by purchasers of the Target Group’s properties respectively. Such guarantees terminate upon the earlier of (i) issuance of the real estate ownership certificate to the purchasers or (ii) the satisfaction of mortgaged loan by the purchasers of properties.

Other than the above, as at 31 December 2012, 2013 and 2014 and 31 August 2015, the Target Group did not have any contingent liabilities.

Legal Contingencies

As at 31 December 2012, 2013 and 2014 and 31 August 2015, the Target Group did not have any legal guarantees. In the normal course of business, the Target Group is involved in lawsuits and other proceedings. While the outcomes of such contingences, lawsuits or other proceedings cannot be determined at present, the management believes that any resulting liabilities will not, individually or in the aggregate, have a material adverse effect on the financial position or results of operations.

Off-balance Sheet Commitments and Arrangements

Except for the contingent liabilities described above, the Target Group has not entered into any off-balance sheet arrangements or commitments to guarantee the payment obligations of any third parties. The Target Group does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Target Group or engages in leasing or hedging or research and development services with the Target Group.

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Market Risks

The Target Group has established policies and procedures for identifying, evaluating, monitoring and controlling the various types of risks pertaining to the Target Group’s business. The management policies for the major types of risks are as follows:

Credit Risk

As at 31 December 2012, 2013 and 2014 and 31 August 2015, the Target Group’s maximum exposure to credit risk which will cause a financial loss to Ground Real Estate Group due to failure to discharge an obligation by the counterparties is the carrying amount of the respective recognised financial assets as stated in the statement of financial position. The Target Group’s credit risk is primarily attributable to accounts and other receivables.

In order to minimise the credit risk, the management of the Target Group has credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. The Target Group has retained the legal titles of the rental deposits received from the tenants before the accounts receivables are settled. In this regard, the management of the Target Group considers that the Target Group’s credit risk is significantly reduced.

The Target Group typically provides guarantees to banks in connection with the customers’ borrowing of mortgage loans to finance their purchase of properties for an amount up to 70% of the total purchase price of the property. Detailed disclosure of these guarantees is made in note 29 to the Accountants’ Report on the Target Group set out in Appendix IIIA to this circular. If a purchaser defaults on the payment of its mortgage loan during the guarantee period, the bank holding the guarantee may demand the Target Group to repay the outstanding principal on the loan and any interest accrued thereon. Under such circumstances, the Target Group is able to retain the customer’s deposit and resell the property to recover any amounts paid by the Target Group to the bank. In this regard, the directors of the Target consider that the Target Group’s credit risk is significantly reduced.

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Liquidity risk

The Target Group’s objective is to maintain a balance between continuity of funding and flexibility through the proceeds from the pre-sale of properties and utilisation of borrowings. The maturity profile of the Target Group’s financial liabilities at the end of the reporting period based on contractual undiscounted payments are summarised below:

More than More than On demand one year but two years but Total or within less than less than undiscounted Carrying one year two years five years cash flow amount RMB RMB RMB RMB RMB

At 31 December 2012 Trade and other payables (Note) 651,635,677 – – 651,635,677 651,635,677 Interest-bearing borrowings 27,675,000 27,675,000 302,028,329 357,378,329 300,000,000

679,310,677 27,675,000 302,028,329 1,009,014,006 951,635,677

At 31 December 2013 Trade and other payables (Note) 738,684,418 – – 738,684,418 738,684,418 Interest-bearing borrowings 116,590,000 325,408,329 253,598,616 695,596,945 612,400,000

855,274,418 325,408,329 253,598,616 1,434,281,363 1,351,084,418

At 31 December 2014 Trade and other payables (Note) 1,320,931,240 – – 1,320,931,240 1,320,931,240 Interest-bearing borrowings 519,608,329 33,598,616 – 553,206,945 526,600,000

1,840,539,569 33,598,616 – 1,874,138,185 1,847,531,240

At 31 August 2015 Trade and other payables (Note) 1,261,156,860 – – 1,261,156,860 1,261,156,860 Interest-bearing borrowings 588,660,181 220,866,849 54,776,712 864,303,742 782,400,000

1,849,817,041 220,866,849 54,776,712 2,125,460,602 2,043,556,860

Note: Receipt in advance from management services are excluded from the maturity profile as there is no cash outflows for the Target Group.

Fair value

The Target Group’s investment properties and financial assets, including other receivables and financial liabilities, including other payables and interest-bearing borrowings are approximately valued at their fair values as their carrying amounts.

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Currency Risk

The Target Group’s business is principally conducted in RMB and most of the Target Group’s monetary assets and liabilities are denominated in RMB. Accordingly, the Target Group considers its exposure to currency risk to be insignificant.

Sensitivity Analysis

Sensitivity analysis on GFA delivered

If GFA had been 10% higher/lower during the Track Record Period and all other variables were held constant, the Target Group’s net profit would increase/decrease by RMB10,303,723, RMB10,414,481, RMB15,325,201 and RMB25,385,200 for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively.

Sensitivity analysis on unit selling price of properties delivered

If unit selling price of properties delivered had been 10% higher/lower during the Track Record Period and all other variables were held constant, the Target Group’s net profit would increase/decrease by RMB39,491,660, RMB40,796,879, RMB59,568,121 and RMB58,580,750 for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively.

Sensitivity analysis on unit cost of properties delivered

If unit cost of properties delivered had been 10% higher/lower during the Track Record Period and all other variables were held constant, the Target Group’s net profit would decrease/increase by RMB29,519,412, RMB31,069,324, RMB45,095,661 and RMB33,349,263 for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 respectively.

Sensitivity analysis on rental income per square meter

If monthly rental income per square meter had been 10% higher/lower during the Track Record Period and all other variables were held constant, the Target Group’s net profit would increase/decrease by RMB7,804,722 for the eight months ended 31 August 2015.

Interest rate risk

The Target Group is exposed to fair value interest rate risk in relation to fixed-rate bank borrowings. The Target Group is also exposed to cash flow interest rate risk in relation to variable-rate bank balances and deposits with a non-banking financial institution, and variable-rate bank borrowings.

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The Target Group’s exposure to the cash flow interest rate risk relates primarily to the variable-rate bank borrowings. It is the Target Group’s policy to negotiate the terms of the interest-bearing bank borrowings in order to balance the interest rate exposure. The sensitivity analyses below have been determined based on the exposure to interest rates for bank borrowings at the end of the reporting period. No sensitivity analysis has been presented for the exposure to interest rates for bank balances as the management of the Target Group considers that, taking into account that the fluctuation in interest rates on bank balances and deposits with a non-banking financial institution is minimal, the impact of profit or loss for the respective years is insignificant.

The analysis is prepared assuming the variable-rate bank borrowings outstanding at the end of the reporting period were outstanding for the whole year. A 50 basis points increase or decrease during the Relevant Periods is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonable possibility of change in interest rates. If interest rates had been 50 basis points higher/lower during the Track Record Period and all other variables were held constant, the Target Group’s net profit would increase/decrease by RMB3,792,164 for the eight months ended 31 August 2015 (year ended 31 December 2014: RMB4,187,325, year ended 31 December 2013: RMB1,402,234 and year ended 31 December 2012: RMB456,671).

DIVIDEND AND DISTRIBUTABLE RESERVES

The Target Group currently does not have a fixed dividend policy. The Board has the discretion to determine whether to recommend any dividend for any period and, if the Board decides to recommend a dividend, the amount of dividend to be declared. Factors to be taken into account by the Board when determining whether to recommend declaration of a dividend in the future includes the financial conditions of the Target Group, its earnings, cash flow and capital requirements and any other factors the Board considers relevant Ground Real Estate Group will evaluate its dividend policy from time to time in light of its financial position and prevailing economic climate. There is no guarantee that dividends will be paid in the future.

A dividend of RMB145,000,000 declared by Ground Real Estate had been approved by the equity holders on 25 March 2015. At 31 August 2015, the Target Company had distributable reserves of RMB Nil.

A dividend of RMB198,000,000 declared by Jilin Ground Real Estate, a subsidiary of the Target Group had been approved by the equity holders on 25 March 2015 of which RMB35,640,000 was attributable to its non-controlling equity holders.

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KEY FINANCIAL RATIOS

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2015

Gross profit margin (%) (Note 1) 25.9% 25.1% 25.4% 43.1% Net profit margin (%) (Note 2) 26.5% 16.4% 24.9% 19.8% Return on equity (%) (Note 3) 41.0% 20.9% 16.4% 16.7% Current ratio (times) (Note 4) 1.24 1.27 1.36 1.28 Gearing ratio (%) (Note 5) 11.7% 24.4% 25.6% 40.0%

Notes:

(1) Gross profit margin for the years ended 31 December, 2012, 2013 and 2014 and the eight months ended 31 August 2015 was calculated based on the Target Group’s gross profit of respective periods divided by the Target Group’s revenue of respective periods and multiplied by 100%.

(2) Net profit margin for the years ended 31 December, 2012, 2013 and 2014 and the eight months ended 31 August 2015 was calculated based on the Target Group’s net profit of respective periods divided by the Target Group’s revenue of respective periods and multiplied by 100%.

(3) Return on equity for each of the year ended 31 December, 2012, 2013 and 2014 and the eight months ended 31 August 2015 was calculated based on the Target Group’s net profit of the respective periods divided by the equity as at the end of the respective periods and multiplied by 100%.

(4) Current ratios as at 31 December, 2012, 2013 and 2014 and 31 August 2015 were calculated based on the Target Group’s total current assets as at the respective dates divided by the Target Group’s total current liabilities as at the respective dates.

(5) Gearing ratios as at 31 December, 2012, 2013 and 2014 and 31 August 2015 was calculated as net debt divided by total net debt and equity of the Target Group as at the respective date. Net debt was calculated as total bank loans and borrowings from financial institutions less cash and cash equivalents and restricted cash as at the respective dates.

Gross and Net Profit Margin

A discussion of the factors affecting gross and net profit margins during the Track Record Period. Please refer to the paragraphs headed “Gross profit and gross profit margin” and “Profit for the year and net profit margin” in this section respectively.

Return on Equity

The Target Group’s return on equity was 41.0%, 20.9%, 16.4% and 16.7% for the years ended 31 December, 2012, 2013 and 2014 and the eight months ended 31 August 2015, respectively. The decrease in the Target Group’s return on equity was primarily due to an increase in the Target Group’s equity as a result of the common central combination of Jilin Ground Tourism investment on 1 January 2014.

Current Ratio

The Target Group’s current ratio was 1.24, 1.27, 1.36 and 1.28 as at 31 December, 2012, 2013 and 2014 and 31 August 2015, respectively. The increase in the Target Group’s

– 329 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. FINANCIAL INFORMATION OF THE TARGET GROUP current ratio as at 31 December 2012, 2013 and 2014 was primarily due to the increase in the Target Group’s current assets as more properties under development and completed properties held for sale were held by the Target Group. The decrease in the Target Group’s current ratio as at 31 August 2015 was attributable to the interest-bearing borrowings becoming repayable within one year.

Gearing Ratio

The Target Group’s gearing ratio was 11.7%, 24.4%, 25.6% and 40.0% as at 31 December, 2012, 2013 and 2014 and 31 August 2015, respectively. The increase in the gearing ratio from 2012 to 2014 was primarily due to the overall increase in total loan and borrowing level during the years. For the eight months ended 31 August 2015, the gearing ratio decreased as the Target Group did not have significant new bank loans and made certain repayment during the period.

Disclosure required under the Listing Rules

As of the Latest Practicable Date, there were no circumstances which would have given rise to any disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules in respect of Ground Real Estate Group.

No material adverse change

The financial results were and will continue to subject to fluctuations due to the different development cycle of the Target Group’s properties and property mix such as the proportion of properties for sale and rental income from investment properties. Other factors such as the timing of pre-sale, project completion, actual delivery of properties, changes in fair value gain upon transfer to investment properties and changes in fair value of investment properties may also affect our financial results from time to time.

The unaudited loss of RMB2,342,133 was incurred from September 2015 to October 2015 primarily because only twenty four residential units, thirty five car parks and four commercial units were delivered and RMB21,439,977 was recognised for the sales of properties though rental income from Guangze International Shopping Centre and revenue from property management services also contributed RMB2,601,574 and RMB4,894,958 respectively on the turnover. The financial results in the second half of 2015 will be improved when more properties units are expected to be delivered in Guangze. Amethyst City and Guangze International Shopping Centre.

The Directors have confirmed that, except as otherwise disclosed in the circular, since 31 August 2015 and up to the date of this circular, there had been no material adverse change in the Target Group’s financial position or prospects and no event had occurred that would materially and adversely affect the information shown in the Accountants’ Report in Appendix IIIA to this circular.

RELATED PARTY TRANSACTIONS

In respect of the related-party transactions and balances set out Note 28 in the Accountants’ Report in Appendix IIIA to this circular, the Directors confirm that all related party transactions during the Track Record Period were fair, reasonable and in the interest of our Shareholders as a whole.

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UNAUDITED PRO FORMA ADJUSTED NET TANGIBLE ASSETS

The following unaudited pro forma financial information prepared in accordance with paragraph 29 of Chapter 4 of the Listing Rules is for illustrative purpose only, and is set out herein to provide the prospective investors with further financial information about how the proposed listing might have affected the consolidated net tangible assets of the Enlarged Group after the completion of the Acquisition.

The accompanying unaudited pro forma financial information of the Enlarged Group is based on currently available information along with a number of assumptions, estimates and uncertainties. As a result of these assumptions, estimates and uncertainties, the accompanying unaudited pro forma financial information of the Enlarged Group does not purport to predict the Enlarged Group’s future financial position and results.

Although reasonable care has been exercised in preparing the said information, prospective investors who read the information should bear in mind that these figures are inherently subject to adjustments and may not give a true picture of the Enlarged Group’s financial position.

Unaudited pro forma statement of adjusted net tangible assets of the Enlarged Group attributable to owners of the Company

Unaudited Unaudited pro forma pro forma adjusted net Unaudited adjusted net tangible Unaudited net tangible tangible assets of the net tangible assets of the assets of the Enlarged assets of the Group Enlarged Group Group attributable to Group attributable to attributable to owners of the attributable to owners of the owners of the Company owners of the Company Company as at per share as at Company as at per share as at 30 September 30 September 30 September 30 September 2015 2015 2015 2015 RMB’000 RMB RMB’000 RMB Note a Note b Note c Note d

Net tangible assets attributable to owners of the Company [REDACTED][REDACTED][REDACTED][REDACTED]

Notes:

a. The unaudited net tangible assets attributable to owners of the Company as at 30 September 2015 are based on the amount of unaudited net tangible assets of the Group attributable to owners of the Company as at 30 September 2015, which is extracted from the unaudited condensed consolidated statement of financial position of the Group as at 30 September 2015 and translated into RMB at the exchange rate of HK$[REDACTED]toRMB[REDACTED].

b. The number of shares used for the calculation of the audited net tangible assets of the Group attributable to owners of the Company per share is [REDACTED], being the number of shares in issue as at 30 September 2015.

c. The unaudited pro forma adjusted net tangible assets of the Enlarged Group attributable to owners of the Company as at 30 September 2015 are calculated based on the amount of the unaudited pro forma adjusted net tangible assets attributable to owners of the Company as at 30 September 2015, which is extracted from the unaudited pro forma consolidated statement of financial position of the Enlarged Group, after excluding goodwill of approximately RMB[REDACTED].

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d. The number of shares used for the calculation of the unaudited pro forma adjusted net tangible assets of the Enlarged Group attributable to owners of the Company per share is [REDACTED], comprising [REDACTED] shares in issue as at 30 September 2015 and [REDACTED] Consideration Shares to be issued upon completion of the Acquisition as described in note 3 above.

Acquisition expenses

As of 31 August 2015, the estimated total expenses in relation to the Acquisition amounted to approximately HK$30 million, which will be charged to the consolidated income statement of the Enlarged Group for the year ending 31 March 2016, assuming the Acquisition is completed on or before 31 March 2016. These acquisition expenses mainly comprise legal and professional fees paid to the legal advisers, the reporting accountants, the independent financial adviser and the joint sponsors.

PROPERTY INTEREST AND PROPERTY VALUATION

The property valuer has valued the property interests of the Target Group as at 31 October 2015 and is of the opinion that the aggregate value of the Target Group’s properties as at such date were RMB[REDACTED] million. The full text of the letter, summary of values and valuation certificates with regard to such property interests are set out in the valuation report as set out in Appendix VIB to this circular.

The statement below shows the reconciliation of the aggregate value of certain properties as reflected in the audited consolidated financial statements of the Target Group as at 31 August 2015 as set out in Appendix IIIA to this circular with the valuation of these properties as at 31 October 2015 as set out in the valuation report as set out in Appendix VIB to this circular.

RMB (million)

Net book value as at 31 August 2015 (audited) – Investment properties [REDACTED] – Properties under development [REDACTED] – Completed properties held for sale [REDACTED]

[REDACTED] Add: Additions during the period from 31 August 2015 to 31 October 2015 (unaudited) [REDACTED] Less: Transfer of properties held or under development for sale to cost of sales during the period from 31 August 2015 to 31 October 2015 (unaudited) [REDACTED]

Net book value as at 31 October 2015 (unaudited) [REDACTED] Net valuation surplus [REDACTED]

Valuation of properties as at 31 October 2015 as set out in Appendix VIB [REDACTED]

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SHARE CAPITAL

As at the Latest Practicable Date, the Company had only one class of shares in issue, namely ordinary shares of HK$0.05 each. The authorised share capital of the Company is HK$780,000,000 divided into 15,600,000,000 ordinary shares of HK$0.05 each, and there was 858,450,000 shares in issue.

The following table sets out the authorised and issued share capital of the Company upon Completion and the proposed increase in authorised share capital as detailed in this circular becoming effective, and upon full conversion of the Convertible Bonds and the CPS:

Authorised

Shares HK$

15,600,000,000 Shares 780,000,000.00

CPS

4,539,352,941 CPS 226,967,647.05

Issued and fully paid or credit as fully paid

Shares HK$

858,450,000 Shares in issue as at the Latest Practicable Date 42,922,500.00 343,000,000 Consideration Shares to be allotted and issued 17,150,000.00 5,127,588,235 Conversion Shares to be allotted and issued 256,379,411.75 upon full conversion of the Convertible Bonds and the CPS

6,329,038,235 316,451,911.75

(1) The Shares in issue as at the Latest Practicable Date, (2) the Consideration Shares to be allotted and issued, (3) the Conversion Shares fall to be allotted and issued upon the conversion rights attaching to the Convertible Bonds and CPS are exercised in full represents approximately 13.6%, 5.4% and 81.0%, respectively, of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares and the Conversion Shares.

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RANKING

The Consideration Shares will rank equally among themselves and pari passu in all respects with the Shares in issue on the date of their allotment and issuance. The CB Conversion Shares shall rank equally among themselves and pari passu in all respects with the Shares in issue on the business day immediately following the date of delivery of the conversion notice. Each CPS ranks, subject to applicable laws, in priority to the Shares and any other shares in the share capital of the Company as to dividend and return of capital on liquidation, winding up or dissolution of the Company. The CPS Conversion Shares, when allotted and issued upon conversion of the CPS, shall rank equally among themselves and pari passu in all respects with the Shares in issue on the date of allotment and issuance.

PUBLIC FLOAT

Pursuant to Rule 8.08(1)(a) of the Listing Rules, upon Completion and at all times thereafter, the Company must maintain the “minimum prescribed percentage” of 25% of the issued share capital of the Company in the hands of the public (within the meaning as defined under Rule 8.24 of the Listing Rules). The issue of the Convertible Bonds (and the CB Conversion Shares upon conversion of the Convertible Bonds) and the issue of the CPS (and the CPS Conversion Shares upon conversion of the CPS) will be subject to the Company meeting the minimum public float requirement under the Listing Rules.

UNDERTAKINGS BY MS. CUI

Pursuant to Rule 10.07 of the Listing Rules, Ms. Cui has undertaken to the Stock Exchange and to the Company that, she shall not, and shall procure that Charm Success and the Vendor shall not, without the prior written consent of the Stock Exchange:

(a) except for the deemed disposal of the Shares (including the CB Conversion Shares) or CPS by Charm Success and the Vendor upon any issue of share or securities by the Company within the first six months of Listing (as exempted by the Stock Exchange in the waiver from strict compliance with Rule 10.08 and Rule 10.07(1)(a) of the Listing Rules), in the period commencing on the date of this circular and ending on the date (the “End Date”) which is six months from the date of Listing, dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares (including the Consideration Shares) or any CPS held by them or any beneficial or other interests therein;

(b) in the period of six months commencing from the End Date, dispose of, nor enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares (including the Consideration Shares) or any CPS held by them or any beneficial or other interests therein if, immediately following such disposal or upon the exercise or enforcement of such options, rights, interests or encumbrances, Ms. Cui would cease to be a controlling Shareholder of the Company; and

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(c) within the period commencing on the date of this circular and ending on the date which is 12 months from the date of Listing, she will:

(i) when she, Charm Success or the Vendor pledges or charges any securities or interests in any securities of the Company beneficially owned by it in favour of an authorised institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong Kong) pursuant to Note (2) to Rule 10.07(2) of the Listing Rules, immediately inform the Company of such pledge or charge together with the number of securities of the Company so pledged or charged; and

(ii) when she, Charm Success or the Vendor receives indications, either verbal or written, from the pledgee or chargee that any of the pledged or charged securities of the Company will be disposed of, immediately inform, or procure them to immediately inform the Company in writing of such indications.

GENERAL MANDATES

General Mandate

The Directors have been granted an unconditional general mandate to allot, issue and deal with unissued Shares or securities convertible into Shares, or options, warrants or similar rights to subscribe for any Shares, and to make, grant, sign or execute offers, agreements or options, deeds and other documents which would or might require the exercise of such power, subject to and in accordance with all applicable laws. The aggregate nominal value of Shares to be allotted and issued shall not exceed 20% of the aggregate nominal value of the share capital of the Company in issue as at the date of passing of the relevant resolution at the annual general meeting on 20 August 2015.

Repurchase Mandate

The Directors have also been granted an unconditional general mandate to purchase the Shares on the Stock Exchange or any other stock exchange on which the Shares may be listed and recognised by the SFC and the Stock Exchange for such purpose, and otherwise in accordance with the rules and regulations of the SFC, the Stock Exchange and all applicable laws in this regard. The aggregate nominal amount of the Shares which may be purchased by the Company shall not exceed 10% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing of the relevant resolution at the annual general meeting on 20 August 2015.

These two mandates expire at the earliest of:

(a) the conclusion of the next annual general meeting of the Company;

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(b) the expiration of the period within which the next annual general meeting of the Company is required by the applicable laws or the Bye-laws to be held; or

(c) the date on which the authority given to the Directors by the relevant resolution is revoked or varied by an ordinary resolution of the Shareholders in general meeting.

OUTSTANDING OPTIONS AND 2012 SHARE OPTION SCHEME

The existing share option scheme (the “2012 Share Option Scheme”) was adopted by the shareholders of the Company at the annual general meeting held on 5 September 2012 with scheme mandate limit refreshed on 8 August 2014.

The 2012 Share Option Scheme shall be valid and effective for 10 years from the date of adoption, i.e. 5 September 2012. Since the adoption of the 2012 Share Option Scheme, 50,700,000 and 33,650,000 share options were granted by the Company thereunder at an exercise price of HK$0.98 and HK$1.20 per share respectively.

CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED

In accordance with the Bye-laws and subject to the Companies Act, in the event of variation, modification or abrogation of any of the rights attached to the Shares or any class of shares, approvals by a special resolution passed at a separate general meeting of the holders of the shares of that class or consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class is required. For further details, please refer to the section headed “Summary of the Constitution of the Company and Bermuda Company Law” set out in Appendix VII to this circular.

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So far as it is known to the Directors of the Company, as at the Latest Practicable Date, the following persons (not being a Director or chief executive of the Company) had an interest or short position in the Shares or the underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or were, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Enlarged Group:

(a) Long position(s) in the Shares and underlying shares of the Company

Approximate Number of percentage of Name of Shareholder Capacity Shares shareholding (Note 1) (Note 2)

Charm Success Group Beneficial Owner [REDACTED][REDACTED] Limited

Ka Yik (Note 3) Beneficial Owner [REDACTED][REDACTED]

Ms. Cui (Note 4) Interest in a [REDACTED][REDACTED] controlled corporation

China Galaxy International Having a security [REDACTED][REDACTED] Finance (Hong Kong) Co., interest in Limited shares (Note 5)

Notes:

1. Long positions in the Shares and underlying shares of the Company.

2. The percentages (rounded to two decimal places) were calculated based on the total number of Shares in issue as at the Latest Practicable Date, i.e. [REDACTED] Shares.

3. Ka Yik is interested in [REDACTED] Shares and underlying shares of the Company pursuant to the sale and purchase agreement (being the initial agreement as amended and supplemented by the Supplemental Agreement and the Second Supplemental Agreement).

4. Charm Success and Ka Yik are wholly and beneficially owned by Ms. Cui, the daughter of Ms. Chai who is an executive Director of the Company and the chairperson of the Board. Ms. Cui is deemed to be interested in the Shares and underlying shares held by Charm Success and Ka Yik by virtue of being their controlling Shareholder under Part XV of the SFO.

5. Central Huijin Investment Ltd., which currently holds a [REDACTED]% equity interest of China Galaxy Financial Holdings Company Limited, which in turn is the controlling shareholder of China Galaxy Securities Co., Ltd., a joint stock limited company incorporated in the PRC on 26 January 2007, whose H shares are listed on the Hong Kong Stock Exchange (Stock Code: 06881). China Galaxy International Financial Holdings Limited and China Galaxy International Finance (Hong Kong) Company Limited are wholly owned subsidiaries of China Galaxy Securities Co., Ltd. All these companies are deemed to have a security interest in the Company’s shares.

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(b) Persons who were interested in 10% or more in any other member of the Enlarged Group

Approximate percentage of interest held in the member of Name of the member of the Name of the Enlarged Enlarged Group shareholder Group

上海新華滙訊通信設備銷售上海新華傳媒連鎖 [REDACTED]% 有限公司 (Shanghai Xinhua 有限公司 Motion Communication (Shanghai Xinhua Technology Company Media Chain Co., Limited*) Ltd.*) (Note 1)

China Motion United China Mobile Group [REDACTED]% Telecom Limited Guangdong Co., (in liquidation) Ltd. (Note 2)

Notes:

1. The ultimate shareholder of 上海新華傳媒連鎖有限公司 (Shanghai Xinhua Media Chain Co,. Ltd.*) is a company listed on the Shanghai Stock Exchange.

2. The ultimate shareholder of China Mobile Group Guangdong Co., Ltd. is a company listed on the Hong Kong Stock Exchange.

Save as disclosed above, the Directors of the Company were not aware, as at the Latest Practicable Date, of any person (not being a Director or chief executive of the Company) who had an interest (or long position) or short position in the Shares or underlying shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Enlarged Group.

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This section contains information relating to the economy of the PRC and the industry in which the Target Group operates. The Company has extracted and derived the information in the section below, in part, from the Market Research Report, a commissioned report from Ernst & Young (China) Advisory Limited, an independent market consultant. Please see the paragraph “Sources of Information” below. The Company believes that such sources are appropriate sources for the information and statistics below, including forward-looking information for future periods as identified, and has taken reasonable care in extracting and reproducing such information. The Company has no reason to believe that such information is false or misleading in any material respect or that any fact has been omitted that would render such information false or misleading in any material respect. The information has not been independently verified by the Company, the Target Group, the Joint Sponsors, any of their respective affiliates or advisers, or any party involved in the Acquisition and the new listing application by the Company and no representation is given as to its completeness, accuracy or fairness. Such information may not be consistent with other information compiled within or outside the PRC. The information and statistics should not be relied upon in making, or refraining from making, any investment decision.

SOURCES OF INFORMATION

Ernst & Young (China) Advisory Limited (“EY Advisory”), an independent consultant, was commissioned by the Company, to conduct a customized and detailed analysis of the real estate industry in China and the cities where the Target Group operates, and prepare a report setting out its objective and fair overview of China’s real estate industry.

EY Advisory is an independent global consulting company. EY Advisory provides services including commercial due diligence, market assessment, market penetration and growth strategy and competitive analysis. EY Advisory has extensive experience in providing market entry strategy for industry analysis for real estate companies.

EY Advisory primarily adopted the top-down research method, assisted by information collected through the bottom-up research method to prepare its report as commissioned by the Company. It conducted primary research and secondary research and used its internal database as a major data source for the Market Research Report. Primary research involves visits to observers from real estate companies, China’s national or regional associations, governmental or semi-official agencies and other sectors, and interviews with different stakeholders. Secondary research relates to employment of professional analysts collecting information from various publications, including but not limited to government statistics, industry database, publicly released corporate information and publicly available statistics. EY Advisory seeks to ensure the accuracy of the projections included in the Market Research Report by conducting both quantitative and qualitative analyses on the market size and growth trends, and using data from government authorities, industry public information and industry expert interviews, crosschecked against historical market information, as the basis for its projections and considers the data and statistics reliable.

EY Advisory used various sources of information, the accuracy of which was verified, analyzed and compared with each interviewee’s information and opinion to avoid bias. The Company has made a total payment of RMB500,000 for its research services, which the Company believes reflects the prevailing market rate. Except for the

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Market Research Report, the Company has not appointed or commissioned any other party to prepare any other research report for the purpose of preparing this section. This section is based on the Market Research Report so as to provide a comprehensive description of the industry in which the Target Group operates.

While preparing this section, EY Advisory has relied on the assumptions listed below:

• The PRC economy will maintain stable growth;

• The social, economic and political environment of the PRC will remain stable; and

• Market drivers such as favorable regulatory policies, continuous urbanization, consistent necessity demand for residential real estate and the growing demand for improved residential housing will drive the growth of the PRC real estate market.

To the best of knowledge and information and subject to the availability of up-to-date information from official government sources and other industry sources, the Directors confirm that there were no material adverse changes in the market information since the Latest Practicable Date which may qualify, contradict or have an impact on the information set out in this section.

OVERVIEW OF CHINA’S MACROECONOMIC DEVELOPMENT

According to the National Bureau of Statistics of China, in 2014 China’s GDP was RMB63,646 billion, of which the primary, secondary and tertiary industries accounted for 9.2%, 42.6% and 48.2%, respectively, with growth rates of 4.1%, 7.3% and 8.1%. From 2009 to 2014, China’s GDP increased from approximately RMB34,090 billion to RMB63,646 billion at a CAGR of approximately 13.3%. In 2014 the real GDP growth rate was 7.4%, which was slightly less than the 7.7% in 2013. As at the end 2014, per capita GDP was RMB46,531.

China’s GDP and real GDP growth rate, China’s per capita GDP, 2009–2014 2009–2014

RMB Billion RMB 70,000 12.0% 50,000 20.0% 10.4% 45,000 17.2% 17.3% 18.0% 60,000 9.3% 10.0% 9.2% 40,000 16.0%

50,000 7.8% 7.7% 35,000 14.0% 7.4% 8.0% 30,000 11.3% 12.0% 40,000 6.0% 25,000 9.3% 9.0% 10.0% 63,646 46,531 30,000 41,805 56,885 20,000 38,364 8.0% 51,947 35,114 47,310 4.0% 20,000 40,151 15,000 29,943 6.0% 34,090 25,545 10,000 4.0% 10,000 2.0% 5,000 2.0%

0 0.0% 0 0.0% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 GDP Real GDP growth rate Per capita GDP Per capita GDP growth rate Source: National Bureau of Statistics of China Source: National Bureau of Statistics of China

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China’s population is increasing by 6-7 million people per year and urbanization is accelerating

According to the National Bureau of Statistics of China, from 2009 to 2014, China’s population increased from 1,335 million in 2009 to 1,368 million at a CAGR of approximately 0.5%. For the past five years there was an increase of around 6 to 7 million people per year in China. According to EY Advisory, in recent years, the government has been more flexible regarding family planning and population policies; however, these changes are not expected to have a significant impact on population growth in the short term.

Population and urbanization rate of China, 2009–2014

No. of People Million 1,600 56.0% 54.8%

1,400 53.7% 54.0% 1,200 52.6%

51.3% 52.0% 1,000 49.9% 800 50.0% 1,33548.3% 1,341 1,347 1,354 1,361 1,368 600 48.0% 400 712 731 749 645 670 691 46.0% 200

0 44.0% 2009 2010 2011 2012 2013 2014 Population of China Urban population of China Urbanization rate

Source: National Bureau of Statistics of China

Urbanization is an important driver for the growth of the real estate industry. From 2009 to 2014, China’s urban population increased from 645 million in 2009 to 749 million at a CAGR of approximately 3.0%. The urban population growth rate is much faster than that of the general population. From 2009 to 2014, China’s urbanization rate increased from 48.3% to 54.8%.

OVERVIEW OF CHINA’S REAL ESTATE MARKET

China’s real estate market has experienced significant expansion in recent years. From 2009 to 2014, China’s real estate investment increased from approximately RMB3,623 billion to RMB9,504 billion at a CAGR of approximately 21.3%. Due to the RMB40 trillion stimulus, which aimed to ensure economic growth during the 2008-2010 financial crisis, real estate market investment had increased significantly. In 2010, the government promulgated real estate macro-control policies which led directly to the decrease in available supply of construction land in 2010 and 2012. As a result, the real estate market growth rate dropped from 33.2% in 2010 to 16.3% in 2012.

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In late 2013, benefiting from the overall economic recovery and related policy loosening, the scale of investment in the real estate industry reached a record high, and the industry gradually picked up with land supply increasing correspondingly. In 2013, market differentiation accelerated. On the one hand, residential property prices in 1st-tier cities continue to increase and recorded growth over 20% YoY (year to year); on the other hand, significant property oversupply problems arose in some 3rd-tier and 4th-tier cities, leading to price declines resulting in cash flow difficulties for many real estate developers. As a whole, 2013 still recorded growth of 19.8% for real estate investment at the national level, which was mainly contributed by 1st-tier cities and major 2nd-tier cities.

China’s real estate investment, 2009–2014

RMB Billion 10,000 33.2% 35.0%

27.9% 30.0% 8,000 25.0% 9,504 6,000 19.8% 20.0% 16.3% 15.0% 4,000 8,601 7,180 10.5% 6,174 10.0% 4,827 2,000 3,623 5.0%

0 0.0% 2009 2010 2011 2012 2013 2014 Real estate investment YoY growth

Source: National Bureau of Statistics of China

From 2009 to 2014, the average price of residential properties increased from RMB4,459 per sq.m to RMB5,932 per sq.m according to the National Bureau of Statistics of China. However, the price increase rate has slowed down, where the average price only slightly increased by 1.4% in 2014 as compared to 2013. In terms of GFA, in 2013, the total GFA of residential property sold increased by 172 million sq.m, or 17.5% over that of 2012. However, from the beginning of 2014, the residential market’s momentum slowed as investors became more cautious about the market and China’s economy. The residential property sold only reached 1,052 million sq.m, and decreased by 9.1% from that of 2013, far behind the growth rate of 17.5% in 2013 as compared to 2012.

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Average price of residential properties sold, China’s total GFA of residential properties sold, 2009–2014 2009–2014

RMB per sq.m Million sq.m 7,000 10.0% 1,400 17.5% 20.0% 8.7% 9.0% 6,000 1,200 15.0% 7.7% 8.0% 8.3% 5,000 7.0% 1,000 10.0% 6.0% 5.7% 6.0% 800 3.4% 5.0% 4,000 2.0% 5.0% 3,000 5,850 5,932 600 1,157 0.0% 5,430 4.0% 1,052 4,993 934 965 985 4,459 4,725 862 2,000 3.0% 400 -5.0% -9.1% 2.0% 1.4% 1,000 200 -10.0% 1.0%

0 0.0% 0 -15.0% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 Average price YoY growth Total GFA of residential properties sold Source: National Bureau of Statistics of China YoY growth

Given the growth in the real estate market over the past few years, land purchase prices have increased accordingly. From 2009 to 2014, the average land purchase price increased from approximately RMB1,614 per sq.m to RMB3,002 per sq.m, and has almost doubled over the past five years, representing a CAGR of approximately 13.2%.

In spite of the fluctuations in the real estate market in 2014, the average land purchase price continued to rise. In 2014, the average land purchase price reached RMB3,002 per sq.m, an increase of 17.5% over that of 2013, indicating that real estate developers are still confident about the market in the long run.

OVERVIEW OF JILIN PROVINCE’S MACROECONOMIC DEVELOPMENT

Jilin Province’s economy has achieved substantial growth in recent years. From 2009 to 2014, the nominal GDP of Jilin Province increased from approximately RMB728 billion in 2009 to approximately RMB1,380 billion in 2014, at a CAGR of approximately 13.7%, which was slightly higher than the national nominal GDP CAGR of 13.3% over the same period. However, Jilin’s economy is still small in scale with its GDP only contributing around 2.2% of the national GDP.

According to the National Bureau of Statistics of China, in 2014 Jilin’s GDP was approximately RMB1,380 billion, of which the primary, secondary and tertiary industries accounted for 11.0%, 52.8% and 36.2%, respectively, with growth rates of 4.6%, 6.6% and 6.9% as compared to 2013.

Per capita income growth in Jilin Province has been increasing at a rate higher than the national level

Jilin Province’s per capital income growth of RMB23,218 in 2014 is still lower by RMB5,626 as compared to the national level of RMB28,844. From 2009 to 2014, the per capital disposable income of urban household in Jilin Province increased from RMB14,006 to RMB23,218 at a CAGR of approximately 10.6%.

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Jilin Province’s per capita disposable income of urban household and the growth rate, 2009–2014

RMB 25,000 18.0% 15.5% 16.0%

20,000 13.5% 14.0%

12.0% 15,000 10.0% 10.2% 10.0% 23,218 22,275 8.0% 10,000 20,208 17,797 15,412 6.0% 14,006 4.2% 5,000 4.0% 2.0%

0 0.0% 2009 2010 2011 2012 2013 2014 Per capita GDP Growth rate Source: National Bureau of Statistics of China

OVERVIEW OF JILIN PROVINCE’S REAL ESTATE MARKET

Jilin Province’s real estate investment, 2009–2014

RMB Billion 150 26.5% 30.0% 21.8% 20.0% 12.4%

100 10.0%

-4.4% 0.0% 131 125 117 103 50 92 -10.0% 76 -17.8% -20.0%

0 -30.0% 2009 2010 2011 2012 2013 2014 Residential investment YoY growth Source: National Bureau of Statistics of China

From 2009 to 2014, real estate investment in Jilin Province increased from approximately RMB76 billion in 2009 to RMB103 billion at a CAGR of approximately 6.4%.

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Jilin Province’s residential investment, 2009–2014

RMB Billion 120 25.8% 30.0% 20.9% 100 20.0% 14.2%

80 7.3% 10.0%

60 0.0% -7.7% 92 99 40 91 -10.0% 73 73 61 20 -20.0% -19.6%

0 -30.0% 2009 2010 2011 2012 2013 2014 Residential investment YoY growth Source: National Bureau of Statistics of China

The restrictive regulatory policies introduced by the government came into effect nationwide in 2011 to cool down the real estate market. As a result, residential investment in Jilin Province continued to grow from 2009 and 2011 until the market witnessed a decrease in growth rate to 7.3% in 2012 before registering negative growth of 7.7% in 2013 and 19.6% in 2014.

Residential investment accounted for 80% of the real estate market in 2009 but fell to 71% in 2014, which showed that even though investment in non-residential sectors, such as commercial and tourism properties had increased, overall real estate investment in Jilin Province was still dominated by residential properties.

From the perspective of completed volume and sales volume, the annual sales volume reached more than 220,000 housing units after 2009. Although there was a slight decrease in 2013, the trend was in line with the GFA of residential property sold. The GFA of residential property sold in Jilin Province in recent years was stable due to restrictive regulations, which indicated that necessity demand still existed and speculators had been squeezed out of the market.

Sales revenue from residential properties in Jilin Province increased by 42.3% in 2009 and 50.1% in 2010. The growth rate slowed down to 20.0% in 2011. In 2012 and 2013, sales revenue decreased but still remained at about RMB84 billion. From 2009 to 2013, sales revenue of residential properties in Jilin Province was at a CAGR of approximately 14.4%.

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Jilin Province’s sales revenue of residential properties, 2009–2014

RMB Billion 120 60.0% 50.1%

100 42.3% 40.0% 80 20.0% 60 20.0%

84 84 88 40 74 0.4% 68 0.0% 49 20 -5.2% -18.6% 0 -20.0% 2009 2010 2011 2012 2013 2014

Jilin Province sales revenue of residential properties Source: National Bureau of Statistics of China

KEY DRIVERS FOR JILIN PROVINCE’S REAL ESTATE MARKET

Urbanization is expected to continue boosting residential real estate development

China’s urbanization rate increased from 48.3% in 2009 to 54.8% in 2014, and is still expecting to increase. China’s urbanization as a whole will be a long process, and therefore the need for residential properties will persist for some time. In general, urbanization is making steady progress as urban populations are increasing due to the influx of rural residents. Urbanization is expected to remain a major driver for residential real estate development for Jilin Province and China.

Increasing disposable income and purchasing power drives purchase of residential real estate

With disposable income of urban citizens expecting to increase at a fast rate, EY Advisory expects that going forward, such increase in disposable income and purchasing power is expected to drive purchase of residential real estate.

Real estate ownership is driven by the housing needs of newly married couples

From 1979 to 1992, China experienced a baby boom with about 310 million babies born in that decade. By 2014, this generation reached the age from 23 to 36, and comprises of a significant group of potential customers for residential real estate. As ownership of real estate often comes before marriage in China, the residential real estate trend is closely associated with the marriage trend in China.

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2009–2014 Number of new marriage registration in China

Million couple 15 6.0%

4.9% 5.0% 14 13.9 4.0%

13.4 3.1% 13 13.2 3.0% 2.4% 13.0

1.8% 2.0% 12.4 1.6% 12 12.1 1.0%

11 0.0% 2009 2010 2011 2012 2013 2014E Number of new registered marriages Growth Rate

Source: Ministry of Civil Affairs of China

KEY CHALLENGES FOR JILIN PROVINCE’S REAL ESTATE MARKET

The decreasing influence of real estate on the Chinese economy has impacted investment demand in the market

China’s GDP has grown at around 10% per year in the past 10 years. This is an explosive and unprecedented rise that was mainly driven by export and fixed asset investment. Starting with the Twelfth Five-Year Plan, China’s economic structure has transitioned from investment to consumption as the largest economic contributor. The government has since released a series of policies to limit investment in the real estate market, which means that growth in the real estate market will not be led by heavy investment in the near future.

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The residential property market suffers from high level of accumulated inventory

Ratio of residential property area for sale/residential property area sold, 2009–2014

0.45

0.40 0.39 0.35

0.30

0.25 0.28 0.24 0.20

0.15 0.19

0.10 0.13 0.13

0.05

0.00 2009 2010 2011 2012 2013 2014 Source: National Bureau of Statistics of China

The amount of residential property for sale has increased significantly since 2011. The growth rate in 2010 was only 8% and was jumped to 45% in 2011, and has remained at a high level ever since. The amount of residential property for sale increased from 115 million sq.m in 2009 to 407 million sq.m in 2014.

Meanwhile, the growth rate of residential property sold was significantly lower than that for sale. The ratio of residential property for sale over the residential property sold has increased since 2011. The ratio jumped sharply from 0.28 in 2013 to 0.39 in 2014, signaling that the inventory accumulation problem had become more severe. In 2014, the ratio was already almost three times than that in 2009. The inventory accumulation problems are especially severe for 3rd-tier and 4th-tier cities.

Real estate policy control continues to impact demand, although the policies in 2014 have shifted focus

From the “State Council’s Notice on Firmly Curbing the Surge in Housing Prices in Some Cities” (referred as the “Notice”) issued in 2010 which promulgates limitations on real estate purchases in 40 key cities, to the residential property tax reform implemented in Shanghai and Chongqing in 2011 and ongoing suppression of speculative investment demand in popular cities, the real estate market in China has been significantly influenced by related policies and regulations. Beginning from 2014, regulator’s policy shifted focus, with the launching of a new real estate policy, the “930 Policy” which loosens restrictions on real estate transactions and provides developers with financial support, thereby increasing industry confidence.

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Real estate developers are facing lower profitability with high borrowing costs and cash flow pressure. The industry will become more concentrated and consolidation is underway

According to the China Index Academy’s survey of land prices in 100 cities in China, land prices increased by about 50% from 2009 to 2014. Real estate developers’ land cost percentage has climbed from 10% to about 30% to 40%. Together with the tightened monetary policy, price increases place tremendous financial pressure on real estate developers. At the same time, the cost of construction has been increasing, resulting in the increase of cost of real estate development and placing profit margins under pressure.

Consolidation of the real estate industry is expected to intensify and the market will become more concentrated. Industry leading real estate developers that are well-funded, with large land bank and diversified real estate projects will be able to manage risk and take advantage of opportunities to expand in scale. On the other hand, small-scale real estate developers with weak financials due to aggressive expansion may face financial difficulties or undergo mergers.

OVERVIEW OF JILIN CITY’S MACROECONOMIC DEVELOPMENT

Jilin City (吉林市) is the second largest city of Jilin Province contributing around 20% of Jilin Province’s GDP. Between 2009 and 2014, Jilin City’s nominal GDP increased from approximately RMB150 billion to approximately RMB273 billion at a CAGR of 12.7%.

According to the Jilin City’s Bureau of Statistics, Jilin City’s GDP was approximately RMB273 billion in 2014, of which the primary, secondary and tertiary industries accounted for 9.5%, 47.8% and 42.7%, respectively. The added value of the real estate industry was approximately RMB11.8 billion, reaching YoY growth of 4.6%.

Overall, Jilin City’s GDP per capita enjoyed an annual growth rate of 4.3% in 2014 and 13.0% for the five-year CAGR (from 2009 to 2014). Based on the estimated year-end population, the GDP per capita in Jilin City in 2014 was RMB63,620 which was RMB13,443 higher than that of Jilin Province.

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Jilin City’s per capita GDP, 2009–2014

RMB 70,000 22.9% 25.0% 20.0% 60,000 20.0% 50,000 40,000 10.7% 15.0%

30,000 50,958 8.1% 10.0% 41,478 56,409 20,000 34,558 4.3% 60,996 5.0% 10,000 63,620 0 0.0% 2009 2010 2011 2012 2013 2014

Per capita GDP Growth Rate

Source: Jilin City’s Bureau of Statistics of China

From 2009 to 2014, Jilin City’s per capital disposable income for urban households increased from RMB15,541 to RMB28,530 at a CAGR of approximately 12.9%, indicating that the purchasing power of Jilin City residents is increasing. The per capital disposal income in 2014 was RMB5,312 higher than the average in Jilin Province.

OVERVIEW OF JILIN CITY’S REAL ESTATE MARKET

Urbanization of Jilin City has been increasing, and its urban territory has expanded accordingly. In line with these trends the real estate market has undergone rapid development. From 2009 to 2013, real estate investment increased from approximately RMB9.9 billion to RMB23 billion in 2013 at a CAGR of approximately 23.4%.

As the second most important economic area in Jilin Province, real estate investment in Jilin City has grown rapidly, representing 13% in 2009 and 18% in 2013 of the total real estate investment in Jilin Province. Following the same trends as real estate investment, from 2009 to 2013, residential investment increased from approximately RMB8.5 billion to RMB16.8 billion at a CAGR of approximately 18.5%. During this period, residential investment increased significantly, particularly from 2009 to 2011, when the growth rate reached 34% and 44% YoY, before slowing down in 2012 (12.2% YoY growth rate) and registering negative growth of 9.1% in 2013.

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Jilin City’s real estate investment, 2009–2014 Jilin City’s residential investment, 2009–2013*

RMB Billion RMB Billion 47.8% 30 50.0% 20 50.0% 44.0% 18.5 18 40.0% 16.4 16.8 25 40.0% 40.5% 16 20.0% 20.7% 34.0% 14 30.0% 20 20.0% 12 11.4 10.0% 20.0% 15 23.0 10 12.2% 8.5 20.6 0.0% 10.0% 24.9 14.25 8 10 -10.0% 14.0 -7.6% 6 0.0% 9.9 -20.0% 4 5 -10.0% -38.0% -30.0% 2 -9.1% 0 -40.0% 0 -20.0% 2009 2010 2011 20122013 2014 2009 2010 2011 2012 2013 Real estate investment YoY growth Real estate investment YoY growth

Source: Jilin City’s Bureau of Statistics Source: Jilin City’s Bureau of Statistics

From 2009 to 2012, Jilin City’s total GFA of residential property sold increased from 4.0 million sq.m to 6.0 million sq.m, representing a steady increase from 2009 to 2012. However, the GFA of residential property sold in 2013 decreased, mainly because of high property prices during that year. Some buyers might have delayed purchases due to the weakness in the real estate property market as signaled by other real estate markets. However, the total revenue from residential properties in 2013 still recorded a 26.1% increase reaching RMB37 million.

Land purchases almost tripled in the past five years due to high demand and ample market supply, reflecting real estate developers’ confidence in the market over the next three to five years. The increase in the total areas of land purchased may be attributed to the expansion of Jilin City’s urban areas, the increase in land being cleared for real estate development, the increase in market demand, and the growth in the real estate market from 2009 to 2012. Real estate developers seem to be confident about the local market’s prospects over the next three to five years.

Jilin City’s sales revenue of residential properties, Jilin City’s total area of land purchased, 2009–2013 2009–2014

RMB Million ’000 sq.m 78.0% 40 45.0% 3,500 80.0% 40.0% 37 40.0% 70.0% 35 3,000 60.0% 29 35.0% 30 3,326 50.0% 2,500 49.1% 26.1% 30.0% 40.0% 25 32.5% 22 22 25.0% 2,000 3,257 2,908 30.0% 20 20.0% 20.0% 15 1,500 2,050 10.0% 15 15.0% 14.4% 00.0% 1,000 1,830 10 10.0% -10.0% 1,227 -10.7 3.1% 500 -20.0% 5 5.0% -38.4% -30.0% 0 0.0% 0 -40.0% 2009 2010 2011 2012 2013 2009 2010 2011 20122013 2014 Sales revenue of residential properties Total area of land purchase YoY growth YoY growth

Source: Jilin City’s Bureau of Statistics Source: Jilin City’s Bureau of Statistics and Fang.com

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OVERVIEW OF BAISHAN’S MACROECONOMIC DEVELOPMENT

Baishan (白山) is a prefecture of Jilin Province, located to the west of Mount Changbai (長白山). Although Baishan’s economy accounts for only about 5% of the provincial economy, it has grown substantially in recent years. From 2009 to 2014, Baishan’s nominal GDP increased from approximately RMB37,040 million to approximately RMB71,562 million, at a CAGR of approximately 14.1%. In 2014, the added value of primary, secondary and tertiary industries accounted for 8.4%, 59.4% and 32.2%, respectively.

Although the GDP nearly doubled from 2009 to 2014, real GDP growth slowed down from 21.5% in 2009 to 6.7% in 2014, in line with the national economy. Based on the estimated year-end population, Baishan’s GDP per capita in 2014 was RMB56,304, or RMB6,127 higher than the provincial average with a CAGR of 14.5% from 2009 to 2014. However, the same as the real GDP growth, per capita GDP growth dropped significantly especially from 2012 to 2014.

Meanwhile, tourism has rapidly developed into an important pillar industry in Baishan. In 2014, 6.5 million domestic tourists visited Baishan, resulting in tourism revenue of RMB7,980 million and YoY growth of 15.0% and 27.2%, respectively. Tourism revenue in 2014 comprised 11.2% of Baishan’s nominal GDP and the contribution rate experienced stable increases from 2009 onwards. Baishan has world renowned scenic views. According to EY Advisory, more tourists are expected to visit Baishan as the tourism industry develops, which will play an increasingly important role in Baishan’s economy.

Baishan city’s tourist industry and % of nominal GDP, 2009–2014

RMB Million 9,000 11.2% 12.0%

8,000 9.3% 10.0% 7,000 8.2% 7.3% 6,000 6.9% 8.0% 6.1% 5,000 6.0% 7,980 4,000 6,274 3,000 4.0% 4,936 2,000 3,863 2,995 2.0% 2,270 1,000

0 0.0% 2009 2010 2011 2012 2013 2014 Tourist industry income (domestic) % of nominal GDP

Source: Baishan Bureau of Statistics

Baishan’s population remained stable close to RMB1.3 million, experiencing a slight decrease at a CAGR of approximately -0.5% from 2009 to 2014. From 2009 to 2014, Baishan’s urbanization rate increased steadily from 67.9% to 69.4%, or both 14.6% higher than the national and provincial levels, respectively.

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Baishan has also seen increasing urbanization trend, with the government of Baishan continuing to relocate rural residents to towns and counties. By 2013, 82,000 households or 200,000 people have been relocated to towns. Moreover, the local government is actively trying to create employment opportunities, such as the Mount Changbai international tourism resort projects, in order to draw workers from nearby towns and cities.

Population and urbanization rate of Baishan, 2009–2014

No. of people Thousand 1,400 70.3% 70.5%

1,200 70.0% 69.4% 69.4% 69.5% 1,000 68.8% 68.7% 69.0% 800 68.5% 1,279 1,271 600 67.9% 1,287 1,285 1,263 887 894 867 68.0% 885 884 400 1,297 881 67.5%

200 67.0%

0 66.5% 2009 2010 2011 20122013 2014 Population of Baishan city Urban population of Baishan city Urbanization rate

Source: Baishan Bureau of Statistics

From 2009 to 2014, Baishan’s per capital disposable income for urban households continuously increased from RMB15,036 to RMB26,690 at a CAGR of approximately 12.2%. The per capital disposal income in 2014 was RMB3,472 higher than the provincial average. Baishan residents enjoyed a robust double-digit increase in disposable income from 2010 to 2013, despite the slowdown in China’s economic growth and the decrease in growth rate of the national level per capita disposable income.

OVERVIEW OF BAISHAN’S REAL ESTATE MARKET

Real estate and residential investment grew continuously from 2009 to 2013 when investment almost tripled. The sole exception was a sudden drop in 2010 due to the implementation of nationwide restrictive policies. Baishan is a relatively small city with many small-scale local real estate development companies. Due to its small size, the real estate market’s risk tolerance is low and Baishan’s real estate market is generally very sensitive to government policies and supply and demand of the market.

From 2009 to 2013, sales of residential properties experienced significant fluctuations; however, the price movement was limited. The GFA of residential property sold rose significantly in 2010 because the overall quality of residential properties in Baishan was low before 2009. With the completion of high quality residential houses developed by large-scale real estate developers in 2010, more residential properties were sold for housing upgrades, mainly due to necessity demand a large number of residential properties were put up for sale in the market in 2010 and 2011 and was sold well. In 2012,

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Baishan’s total GFA of residential properties sold, 2009–2014

’000 m2 1,000.00 123.6% 140.0% 900.00 120.0% 87.2% 800.00 100.0% 700.00 80.0% 600.00 60.0% 40.0% 500.00 14.5% 760.0 20.0% 400.00 786.9 0.0% 300.00 901.0 -20.0% 200.00 352.0 406.0 290 -40.0% 100.00 -60.0% 0.00 -61.8% -80.0% 2009* 2010 2011 2012 2013 2014

Total GFA of residential properties sold YoY growth

Source: Baishan Bureau of Statistics

*Note: As no official statistical data was available for 2009, the GFA of residential properties sold in 2009 was estimated from industry expert interviews.

The increase in tourism is an important driver for the development of Baishan’s tourism real estate industry. Baishan has world renowned scenery that attracts many tourists, and thus tourism is one of the three pillar industries in Baishan. The government of Baishan has also been actively building more and more tourist destinations and facilities, including tourist towns, vacation apartments and ski resorts. In the past five years, the number of tourists in Mount Changbai has grown by more than 15% per year, with the number of tourists growing at a CAGR of 17.9% from 2009 to 2014.

OVERVIEW OF YANJI’S MACROECONOMIC DEVELOPMENT

Yanji (延吉) is located in the east of Jilin Province and is the capital of the Yanbian Korean Autonomous Prefecture. Yanji’s economy accounts for about 2% of the provincial economy and has achieved substantial growth in recent years. From 2009 to 2014, Yanji’s nominal GDP increased from approximately RMB17,491 million to RMB32,400 million at a CAGR of approximately 13.1%. In 2014 Yanji’s GDP was RMB32,400 million, of which the primary, secondary and tertiary industries accounted for 1.8%, 43.9% and 54.3% respectively. In 2009, Yanji’s real GDP growth was at 19.1%, which was significantly higher than the provincial and national real GDP growth. However, in 2014, real GDP growth dropped to 6.0% due to the weaker economic environment.

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From 2009 to 2014, per capita GDP in Yanji increased from approximately RMB34,719 to RMB61,117 at a CAGR of approximately 12.0%.

Yanji’s GDP and real GDP growth rate, 2009–2014 Yanji’s per capita GDP, 2009–2014

RMB Million RMB 35,000 25.5% 70,000 25.0%

30,000 19.1% 60,000 19.9% 20.0% 20.0% 25,000 15.5% 50,000 15.8% 14.2% 15.0% 15.0% 20,000 32,400 40,000 11.4% 12.0% 30,394 57,333 15,000 28,266 30,000 25,066 10.0% 61,117 10.0% 20,636 6.0% 48,206 53,970 10,000 20,000 34,719 40,220 17,491 7.1% 5.0% 6.2% 6.6% 5.0% 5,000 10,000

0 0.0% 0 0.0% 2009 20102011 2012 2013 2014 2009 2010 2011 20122013 2014 GDP Real GDP growth rate Per capita GDP Per capita GDP growth rate

Source: Yanji Bureau of Statistics Source: Yanji Bureau of Statistics

In January 2015, the National Development and Reform Commission and 11 other departments jointly issued the “Notice on the National New Urbanization Comprehensive Pilot Scheme” (Development and Reform Plan No. [2014]2960) (“pilot scheme”), listing 2 provinces and 62 cities (counties) as a new urbanization pilot area. Yanji was the only pilot county from Jilin Province among the 25 selected pilot counties (city, district) nationwide. The “pilot scheme” puts forward five major goals including: establishing a cost-sharing mechanism for urbanization; establishing a sustainable mechanism for investment and financing; reforming the rural curtilage system; exploring the establishment of a new mode of administrative management to reduce administrative costs; and promoting innovative systems and mechanism reformation. The pilot scheme is expected to accelerate Yanji’s urbanization and improve the quality of life for the local residents.

Disposable income has been increasing at an accelerating rate, showing that Yanji residents’ living standards have continuously improved. From 2009 to 2014, per capital disposable income for urban households in Yanji increased from RMB16,462 to RMB27,876 at a CAGR of approximately 11.1%.

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OVERVIEW OF YANJI’S REAL ESTATE MARKET

Real estate development investment in Yanji has increased steadily in the past five years. From the perspective of the real estate development over the last decade, the Jilin provincial government declared that it would renovate 15 million sq.m of shanty towns in the Eleventh Five-Year plan. Yanji started to renovate urban shanty towns in 2006, planning on demolishing 750,000 sq.m of old towns in three years. Since the second half of 2007, Yanbian county and Yanji had added more areas for renovation per the new goals set out in 2007 and 2008. By April 2014, old town reconstruction in Yanji had renovated nearly 1.3 million sq.m, and more than 50,000 people from 16,000 households had been relocated.

Yanji’s real estate investment, 2009–2014

RMB Million 3,000 50.0% 44.0% 45.0% 2,500 31.8% 40.0% 2,000 35.0% 30.0% 20.6% 1,500 25.0% 16.4% 2,469 3,253 20.0% 1,000 12.4% 1,473 15.0% 1,714 500 1,087 1,222 10.0% 5.0% 0 0.0% 2009* 2010 2011 20122013 2014

Real estate investment YoY growth

Source: Yanji Bureau of Statistics

In the past five years, both the total area of residential property under construction and completed in Yanji fluctuated significantly in line with the lag in response to the macro real estate market movement. The GFA of residential property under construction in Yanji increased by 23.2% in 2012 as a significant number of new projects were started. In 2013, the growth of GFA in projects under construction decreased, but still maintained a growth rate of more than 10%. Considering that real estate investment grew by 44% in the same year, the growth momentum of residential real estate construction appears to be insufficient. This shows that apart from residential real estate, the growth of commercial and tourism real estate was very high.

Due to the decrease in GFA of construction projects and fewer new projects being started in 2011, the 2013 GFA of completed residential real estate decreased by 68.7% from 790,000 sq.m in 2012 to less than 250,000 sq.m. The growth curve of the GFA of residential properties for sale is one year behind that of the GFA of completed construction. A large number of residential property projects were completed in 2011 which increased the market supply, and the GFA of residential properties for sale increased by 92.3% in 2012.

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From 2009 to 2013, residential property sold fluctuated between 950-1,200 sq.m per year and the average price continued to climb from RMB2,000 sq.m to RMB3,400 sq.m. In 2011, a new sales model appeared in Yanji’s residential property market. Real estate developers started to sell properties in groups and offered a group discount. This group-shopping model led to a significant rebound in Yanji’s residential property market in 2011 and shifted part of the demand from 2012. In 2012, sales of residential property dropped by 12.6% due to the group-shopping model established in 2011. The market soon recovered in 2013 with growth of 6.1%.

Yanji’s total GFA of residential properties sold, Yanji’s sales revenue of residential properties, 2009–2014 2009–2013*

‘000 sq.m RMB million 1,400 20.0% 4,000 30.0% 14.8% 26.1% 15.0% 1,200 3,500 25.0% 6.1% 10.0% 3,000 20.0% 1,000 14.7% 5.0% 2,500 15.0% 800 0.0% 3,144 2,000 3,443 10.0% 600 -5.0% 3,001 1,194 1,090 1,011 774.8 2,493 949 953 1,500 5.0% -10.0% 400 1,000 0.0% -12.6% -23.4% -15.0% 1.9% 2,447 200 500 -5.0% -20.0% -4.5% -20.5% 0 -25.0% 0 -10.0% 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 GFA of residential property sold Yanji city’s sales revenue of residential properties YoY growth YoY growth

Source: Yanji Bureau of Statistics Source: Yanji Bureau of Statistics

COMPETITIVE LANDSCAPE IN JILIN PROVINCE

Jilin Province’s urban landscape is mostly composed of 3rd-tier and 4th-tier cities, and the real estate market is very fragmented. By the end of 2013, there were more than 1,700 real estate developers in Jilin Province, most of which were small-scale real estate developers. There are three types of real estate developers in Jilin Province: national level, provincial level and local players. National level players mainly focus on Jilin and Changchun due to their more developed markets and local players only focus on local markets. Provincial level real estate developers usually have projects in multiple cities and compete with both national level and local players.

National players in Jilin Province include 萬科企業股份有限公司 (China Vanke Co., Ltd.), 中海地產集團有限公司 (China Overseas Property Group Co., Ltd), 中國保利集團公司 (China Poly Group Corp), 恒大地產集團有限公司 (Evergrande Real Estate Group Limited), 大連萬達集團股份有限公司 (Dalian Wanda Group Corporation Ltd.), 上海綠地（集團）有限公司 (Greenland Group), etc. Provincial level players include Ground Real Estate, 長春新星宇房地產開發有限責任公司 (Xinxingyu Real Estate Group*), 吉林省力旺集團有限公司 (Livon Group*), 亞太房地產開發有限責任公司 (Yatai Group*) and 河源市萬隆房地產開發有限公司 (Wanlong Group*). Local players are a major force in Jilin’s real estate market and account for about 70% to 80% of the market share in terms of sales revenue.

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The number of real estate developers will gradually decline and the size of individual developers will likely increase as the real estate industry in Jilin Province undergoes consolidation.

Number of real estate developers in Jilin Province, Investment ratio of the different real estate projects 2009–2014 in Jilin Province, 2009–2013*

Number 1,800 20.0% 100% 13.6% 1,600 15.0% 90% 15.6% 10.0% 1,400 80% 9.3% 5.0% 70% 1,200 0.7% -0.5% 0.0% 60% 54.7% 59.0% 60.3% 62.2% 1,000 -1.3% -5.0% 50% 70.1% 1,563 800 1,370 1,700 1,235 1,352 -10.0% 1,709 40% 600 -15.0% 30% 37.8% 33.6% 30.3% 30.7% 400 -20.0% 20%

200 -27.4% -25.0% 10% 16.3% 7.5% 7.4% 9.4% 7.1% 0 -30.0% 0% 2009 2010 2011 20122013 2014 2009 2010 2011 2012 2013 Number of developers YoY growth Below RMB100m RMB100-500m Above RMB500m

Source: National Bureau of Statistics of China Source: National Bureau of Statistics of China

Please refer to the section headed “Business – Competitive Strengths” in this circular for further details on the competitive landscape of the real estate market in the PRC.

HISTORICAL PRICE TREND OF CONSTRUCTION MATERIALS

Raw Material

The Purchasing Price Index of Raw Material, Fuel and Power (“PPIRM”) is a common indicator or construction cost which is important to real estate developers. According to data compiled by National Bureau of Statistics of China, PPIRM – construction materials fluctuated during 2010 to 2014. The peak occurred in 2011 with an index of 108.4. However, the price of building materials dropped in 2013 to an index of 98.7. In 2014, it rebounded to an index of 99.8. In general, the price of building materials fluctuates year on year as a result of economic, political and social changes. The table below sets out PPIRM for the years indicated:

2010 2011 2012 2013 2014

Purchasing Price Index of Raw Materials, Fuel and Power – Construction Materials 103.8 108.4 99.7 98.7 99.8

Sources: National Bureau of Statistics of China

* As of the date of this circular, no data for 2014 has been published by the relevant source.

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Steel Prices

The PRC steel prices fluctuated from 2010 to 2014. The China steel price index followed a decreasing trend and reached 3,042.8 by the end of 2014. The table below sets out the steel price index for the years indicated:

2010 2011 2012 2013 2014

China Steel Price Index 4,847.0 4,487.0 3,942.1 3,702.6 3,042.8

Sources: 中國聯合鋼鐵網 Custeel (http://index.custeel.com/)

Cement Prices

The PRC cement prices have decreased from 2010 to 2014. The average cement price nationwide decreased from RMB364.6 per ton in December 2010 to RMB296.2 per ton in December 2012, and then increased to RMB316.3 per ton in December 2014. The table below sets out the average price of average cement price nationwide for the periods indicated:

2010 2011 2012 2013 2014

Average Cement Price Nationwide (RMB per ton) 364.6 329.8 296.2 349.1 316.3

Source: Wind Information, 萬得資訊

* As of the date of this circular, no data for 2014 has been published by the relevant source.

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Set out below is a summary of certain material aspects of the PRC legal and regulatory provisions relating to the operations and business of the Target Group. These include laws and regulations relating to real estate development, property management, taxation and foreign exchange control.

(a) The Land System in the PRC

All land in the PRC is either state-owned or collectively owned, depending on its location. All land in the urban areas of a city or town is state-owned, and all land in the rural areas of a city or town and all rural land are, unless otherwise specified by law, collectively owned. The state has the right to expropriate or requisition its ownership of land or land use rights with compensation in accordance with the law for public interest.

Although all land in the PRC is owned by the state or by collectives, private individuals, businesses and other organisations are permitted to hold, lease and develop land for which they are granted land use rights.

(b) National and Local Legislation

In April 1988, the Constitution of the PRC was amended by the National People’s Congress (the “NPC”) to allow for the transfer of land use rights for value. In December 1988, the PRC Land Administration Law《中華人民共和國土地管理法》 ( ) (the “Land Law”) was amended to permit the transfer of land use rights for value. According to the Land Law which came into force in January 1999, a construction unit that wishes to use state-owned land may obtain the right to use state-owned land by way of a grant of land use rights or by way of an allocation of land with approval of the PRC government. On 28 August 2004, the Land Law was amended to allow the state to expropriate or requisition land for public interest with appropriate compensation.

Under the Regulations on the Implementation of the PRC Land Administration Law (《土地管理法實施條例》) promulgated by the State Council on the basis of the Land Law on 27 December 1998 and became effective on 1 January 1999 (amended on 8 January 2011 and 29 July 2014, respectively), the state implemented a system of land registration and issuance of land certificates. Land ownership and land use rights that are registered according to law are protected by law.

Under the Interim Regulations of the PRC on Grant and Transfer of the Right to Use State-owned Urban Land《中華人民共和國城鎮國有土地使用權出讓和轉讓暫行條例》 ( ) (“Interim Regulations on Grant and Transfer”) promulgated in May 1990, local governments at or above county level have the power to grant land use rights for specific purposes within a definite period to a land user pursuant to a contract for the grant of land use rights against payment of a grant premium.

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Under the Interim Regulations on Grant and Transfer, the maximum periods of grant of land use rights are different based on their usages. They are generally stated as follows:

Maximum Use of Land Period in Years

Commercial, tourism, entertainment 40 Residential 70 Industrial 50 Educational, scientific, technological, cultural, public health or sports 50 Comprehensive Use or Others 50

Under the Interim Regulations on Grant and Transfer, all domestic and foreign enterprises are permitted to acquire land use rights unless the law provides otherwise. The state may not repossess lawfully granted land use rights prior to the expiration of the term of grant unless public interest requires repossession by the state under special circumstances, in which case compensation will be paid by the state. A land grantee may lawfully transfer, mortgage or lease its land use rights to a third party for the remainder of the term of grant.

Upon paying in full the land premium pursuant to the terms of the contract, a grantee of land may apply to the relevant land bureau for a land use rights certificate. In accordance with the PRC Property Rights Law《中華人民共和國物權法》 ( ), which was enacted on 16 March 2007 and came into effect on 1 October 2007, the term of land use rights for land for residential use will automatically be renewed upon expiry. The renewal of the term of land use rights for other uses shall be dealt with according to the then-current property laws. In addition, if the state requisitions land for public interest during the term of the relevant land use rights, compensation shall be paid to the owners of the residential properties and other real estate on the land, and the relevant land premium shall be refunded by the state.

Upon expiry of the term of grant, renewal is subject to the execution of a new contract for the grant of land use rights and payment of a premium. If the term of the grant is not renewed, the land use rights and ownership of any buildings erected on the land will revert to the state without compensation.

According to the “Regulations on Developments and Operations of Real Estate in Jilin City”《吉林市城市房地產開發經營管理條例》 ( ) enacted by Jilin Municipal People’s Congress (the standing committees) on 20 October 2003, a capital system accounts for no less than 20% of the project investment shall be established for real estate development projects. If the land remains idle and exceeds the commencement date for more than one year but less than two years other than the land transfer contract stated, land developers should pay a non-usage fee for less than 20 percent of the land transfer fee; if land approved for development remains unused for more than two years, it should be recovered by the government according to laws and regulations. However, the preceding stipulations shall not apply if the delay is caused by force majeure.

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PRC law distinguishes between the ownership of land and the right to use land. Land use rights can be granted by the state to individuals or entities to entitle individuals or entities to the exclusive use of a piece of land for a specified purpose within a specified term and on such other terms and conditions as may be prescribed. A premium is payable in exchange for the grant of land use rights. The maximum term that can be granted for the right to use a piece of land depends on the purpose for which the land is used. As described above, the maximum limits specified in the relevant regulations vary from 40 to 70 years depending on the purpose for which the land is used.

In accordance with the Regulations on the Grant of State-owned Land Use Rights Through Competitive Bidding, Public Auction and Listing-for-Sale promulgated by the Ministry of Land and Resources《招標拍賣掛牌出讓國有土地使用權規定》 ( ) on 9 May 2002 and amended on 28 September 2007, and the Urban Real Estate Administration Law of the People’s Republic of China《中華人民共和國城市房地產管理法》 ( ) implemented on 1 January 1995 and amended on 30 August 2007 and 27 August 2009 respectively (the “Urban Real Estate Law”), land for commercial use, tourism, entertainment and luxury residential must be granted by means of competitive bidding, public auction or listing-for-sale.

According to the Regulations on the Grant of State-owned Construction Land Use Rights through Competitive Bidding, Public Auction and Listing-for-Sale《招標 ( 拍賣掛牌出讓國有建設用地使用權規定》) promulgated by the Ministry of Land and Resources on 28 September 2007 and implemented on 1 November 2007, land for industrial use, commercial use, tourism, entertainment, commodity housing development and land which attracts two or more applicants must be granted by means of competitive bidding, public auction or listing-for-sale.

On 13 May 2011, the Ministry of Land and Resources promulgated the Opinions on Upholding and Improving the System for the Transfer of Land by Tender, Auction and Listing-for-Bidding《關於堅持和完善土地招標拍賣掛牌出讓制度的意見》 ( ), which specifies, among other things, (i) the correct utilization of the regulating and controlling effects of the land transfer policy through tender, auction and listing-for-bidding; (ii) improvement on the transparency of the system of tender, auction and listing-for-bidding for housing land; (iii) adjustment and improvement on the land transfer policy through tender, auction and listing-for-bidding, including (a) limitation on house price or land price, and transfer of policy-related housing land by listing-for-bidding or auction; (b) limitation on the gross floor area (the “GFA”) of allocated security housing, and transfer of commodity housing land by listing or auction; and (c) implementation of comprehensive assessment on conditions of land development and utilization and land transfer prices, and determination of entitlement to land use rights by tender; (iv) promotion of online operation of land use rights transfers, such as publishing the transfer announcement on the websites of competent authorities, organizing online quotation and auction to determine the winning bid; and (v) supplement and improvement on the content of the transfer contracts for land transfer through tender, auction and listing-for-bidding.

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Under the Regulations on the Grant of State-owned Land Use Rights Through Competitive Bidding, Public Auction and Listing-for-Sale, competitive bidding for land use rights is where the relevant land administration authority (the “grantor”) issues a bidding announcement, inviting individuals, legal persons or other organizations (either specified or otherwise) to tender bids for the land use rights of a particular parcel of land by submitting bid documents for review by the bid evaluation committee, with the land user to be determined according to the results of the bidding at the time and place specified in the bidding announcement. Auction for land use rights is where the grantor issues an auction announcement, and the bidders can at specified time and location openly bid for a parcel of land. Listing-for-sale is where the grantor issues a listing-for-sale announcement, and in accordance with the announcement, the land grant conditions will be listed in a specified land grant exchange within a specified period, bidders’ payment applications will be listed and the land use will be granted according to the bidder’s payment applications at the end of such listing period. The procedures are as follows:

(i) the land authority under the government of the city and county issues an announcement at least 20 days prior to the day of competitive bidding, public auction or listing-for-sale. The announcement should include, without limitation, basic particulars of the land parcel, qualification requirements of the bidder and auction applicants, the methods and criteria used to confirm the winning tender or winning bidder, and the deposit of the bid;

(ii) the grantor conducts a qualification verification of the bidding applicants and auction applicants and instructs the applicants who satisfy the requirements of the announcement to attend the competitive bidding, public auction or listing-for-sale;

(iii) after determining the winning tender or the winning bid by holding a competitive bidding, public auction or listing-for-sale, the grantor and the person who made the winning tender or winning bid then sign a written confirmation. The grantor refunds the other applicants their deposits;

(iv) the grantor and the winning tender or winning bid then enter into a land use rights grant contract at the time and venue set in the confirmation. The deposit of the bid paid by the person who made the winning tender or winning bid is deemed to form part of the consideration for assignment price of the state-owned land use rights; and

(v) the person who made the winning tender or winning bid applies for the land registration after paying the assignment price. The competent government at county level or above then issues the “Land Use Rights Certificate”.

The Regulations on the Grant of State-owned Construction Land Use Rights Through Competitive Bidding, Public Auction and Listing-for-Sale further stipulate that the person who makes the winning tender or winning bid must apply for registration of the land after paying the entire premium, in accordance with the State-owned Construction Land Use Rights Assignment, before obtaining the State-owned

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Construction Land Use Rights Certificate. If the person who makes the winning tender or winning bid does not pay the entire assignment price, they will not be granted the state-owned construction land use rights certificate. Proportional division and grant of the state-owned construction land use rights certificate corresponding to the amount of the assignment price paid is not allowed.

In June 2003, the Ministry of Land and Resources of the PRC promulgated the Regulations on Transfer of State-Owned Land Use Rights by Agreement《協議出讓國有土 ( 地使用權規定》). According to this regulation, if there is only one entity interested in using the land, the land use rights (excluding land use rights used for business purposes including commercial, tourism, entertainment and commodity residential properties) may be granted by way of agreement. The local land bureau, together with other relevant government departments including the city planning authority, will formulate a plan concerning issues such as the specific location, boundary, purpose of use, area, term of grant, conditions of use, conditions for planning and design, date of grant as well as the proposed land premium, which shall not be lower than the minimum price regulated by the state, and submit such plan and proposed land premium to the relevant government for approval. After that, the local land bureau and the person who is interested will negotiate and enter into the grant contract based on the above-mentioned plan and proposed land premium. If two or more entities are interested in the land use rights to be granted, such land use rights shall be granted by means of tender, auction or listing-for-sale.

Upon signing the land grant contract, the grantee is required to pay the land premium pursuant to the terms of the contract and the contract is then submitted to the relevant local bureau for the issuance of the land use right certificate. Upon expiration of the term of grant, the grantee may apply for its renewal. Upon approval by the relevant local land bureau, a new contract or an amendment shall be entered into to renew the grant, and a recalculated grant premium shall be paid.

In order to control and facilitate the procedure for obtaining land use rights, several local governments have stipulated standard provisions in land grant contracts. Such provisions generally include terms such as use of land, land premium and manner of payment, building restrictions including site coverage, total GFA and height limitations, constructions of public facilities, submission of building plans and approvals, deadlines for completion of construction, town planning requirements, restrictions against alienation before payment of premiums and completion of prescribed development and liabilities for breach of contract. Any change requested by the land user in the specified use of land after the execution of a land grant contract will be subject to approvals from the relevant land bureau and the relevant urban planning department, and a new land use contract may have to be signed and the land premium may have to be adjusted to reflect the appreciation of the new use. Registration procedures must then be carried out immediately. The municipal land and resources management departments enter into contracts in accordance with the Model Contract for the Assignment of the Right to Use State-owned Construction Land《國有建設用地使用權出讓合同示範文本》 ( ), which was published by the Ministry of Land and Resources and the State Administration for Industry and Commerce (the “SAIC”) on 29 April 2008 and which came into effect on 1 July 2008.

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The Ministry of Land and Resources issued the Circular on Certain Issues Concerning Strengthening Land Supply and Supervision for Real Estate《國土資源部關於 ( 加強房地產用地供應和監管有關問題的通知》) on 8 March 2010. The circular requires developers to make a 50% down payment of the land premiums within one month from the date of the land grant contract, and to make the rest of the payment within a year. Where a developer enters into a land grant contract but fails to pay land premiums, the relevant land shall be confiscated.

According to the Notice of the Ministry of Land and Resources on Relevant Issues Concerning the Strengthening of Examination and Approval of Land Use in Urban Construction《國土資源部關於加強城市建設用地審查報批工作有關問題的通知》 ( ) enacted by the Ministry of Land and Resources on 4 September 2003, and became effective from the date of promulgation, land use for luxurious commodity houses shall be stringently controlled, and applications for land use rights to build villas shall be denied. According to the Circular on the Distribution of the Catalogue for Restricted Land Use Projects (2012 Edition) and the Catalogue for Prohibited Land Use Projects (2012 Edition)《關於發佈實施 ( 〈限制用地項目目錄(2012年本)〉和〈禁止用地項目目錄(2012年本)〉的通知》) promulgated by the Ministry of Land and Resources and the National Development and Reform Commission (the “NDRC”) in May 2012, the area of residential housing projects granted should not exceed (i) seven hectares for small cities and towns, (ii) 14 hectares for medium-sized cities, or (iii) 20 hectares for large cities, and the plot ratio should not be lower than 1.0.

On 17 April 2010, the State Council issued the Notice on Resolutely Curbing the Soaring of Housing Prices in Some Cities《國務院關於堅決遏制部分城市房價過快上漲的通 ( 知》), which strengthens the supervision of land purchases and financing by real estate development enterprises. According to the notice, the departments of land and resources shall restrain the enterprises which have violated laws and regulations when purchasing new land. If a real estate development enterprise participated in the auction, development and construction of land, its shareholder(s) shall not illegally provide loans, on-lending, guarantee and any other relevant financing. Commercial banks are required to enforce the pre-loan examination and post-loan management on development loans extended to real estate enterprises. Commercial banks are required not to grant loans for new development projects to real estate development enterprises which have left any land idle or engaged in land speculation and the securities regulatory departments are required to suspend the approval of their listing, refinancing and reorganisation of major assets.

(d) Transfer

After land use rights relating to a particular area of land have been granted by the state, unless any restriction is imposed, the party to whom such land use rights have been granted may transfer, lease or mortgage such land use rights for a term not exceeding the term which has been granted by the state. The difference between a transfer and a lease is that a transfer involves the vesting of the land use rights by the transferor in the transferee during the term for which such land use rights are vested in the transferor. A lease, on the other hand, does not involve a transfer of such rights by the lessor to the lessee. Furthermore, a lease, unlike a transfer, does not usually involve the payment of a premium. Instead, a rent is payable during the term of the lease. Land use rights cannot be

– II-6 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW transferred, leased or mortgaged if the provisions of the land grant contract, with respect to the prescribed period and conditions of investment, development and use of the land, have not been complied with. In addition, different areas of the PRC have different conditions which must have been fulfilled before the respective land use rights can be transferred, leased or mortgaged.

All transfers, mortgages and leases of land use rights must be evidenced by a written contract registered with the relevant local land bureau at municipality or county level. Upon a transfer of land use rights, all rights and obligations contained in the contract pursuant to which the land use rights were originally granted by the state are deemed to be incorporated as part of the terms and conditions of such transfer, depending on the nature of the transaction.

Under Article 38 of the Urban Real Estate Law, real property that has not been registered and a title certificate for which has not been obtained in accordance with the law cannot be transferred. Under Article 39 of the Urban Real Estate Law, if land use rights are acquired by means of grant, the following conditions must have been met before the land use rights may be transferred: (i) the premium for the grant of land use rights must have been paid in full in accordance with the land grant contract and a land use rights certificate must have been obtained; (ii) investment or development must have been made or carried out in accordance with terms of the land grant contract, amongst others, more than 25% of the total amount of development for investment must have been made or completed for housing construction projects; and conditions for use of the land for industrial or other construction purpose must have been achieved where the development or investment involves a large tract of land.

(e) Land Reserve for Real Estate Development

According to the Measures on Administration of Land Reserve《土地儲備管理辦法》 ( ) promulgated by the Ministry of Land and Resources, the Ministry of Finance and the People’s Bank of China (the “PBOC”) on 19 November 2007, the land reserve institution is a separate legal entity which is affiliated to the land administrative bureau, and the following land may be brought into the land reserve: (i) state-owned land requisitioned in accordance with the law; (ii) land repurchased by the government; (iii) land obtained by the government by exercising priority purchase right; (iv) agricultural land that has gone through usage modification and expropriation process; and (v) other land obtained in accordance with the law.

Where land is expropriated in order to urban renewal, the local land resource administration shall apply to the competent government for approval and pay compensation to the owners of the expropriated land use rights. The land reserve authority may also purchase the relevant land from the owner of the land use rights through negotiation, in which case it shall enter into a land use rights purchase contract with the owner, and the compensation shall be negotiated between the land reserve authority and the land user based on the assessed value of the land, and approved by the state-owned land resources administrative, financial authorities and other authorities stipulated by local regulations.

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With the approval of the stated-owned land resources administrating authority, the land reserve authority has the right to conduct activities such as preliminary development, protection, management, temporary usage and financing on the land reserve and implementation of the preliminary development. After preliminary development, the relevant land in the reserve may be brought into the local land supply.

(f) Termination

A land use right terminates upon the expiry of the term of grant specified in the land grant contract and the resumption by the state of that right.

The state generally will not withdraw a land use right before the expiration of its term of grant and if it does so for special reasons, such as in the public interest, it must offer proper compensation to the land user, having regard to the surrounding circumstances and the period for which the land use rights have been with the user.

If the term of a land use right is not renewed, upon expiry, the land use rights and ownership of the related buildings erected on the land and other attachments are acquired by the state without compensation. The land user shall take steps to surrender the land use rights certificate and cancel the registration of the certificate in accordance with the Regulations on the Implementation of the Land Administration Law《土地管理法實施條 ( 例》) and other relevant regulations. However, in accordance with the Property Rights Law of the PRC《中華人民共和國物權法》 ( ), the term of land use rights of land for residential use will automatically be renewed upon expiry. The renewal of the term of land use rights of land for other uses shall be dealt with in accordance with the then-current relevant laws.

A land user may apply for renewal of the land use rights and, if the application is granted, the land user is required to enter into a new land grant contract, pay a premium and effect the required registration for the renewal grant.

(g) Document of Title

In the PRC, there are two registers for real estate. Land registration is achieved by the issue of a land use rights certificate by the relevant authorities to the land user. It serves as evidence that the land user has obtained land use rights which can be transferred, mortgaged or leased. The building registration is the issuance of a real estate certificate to the owner. It serves as evidence that the owner has obtained building ownership rights in respect of the buildings erected on that piece of land. According to the Measures for Land Registration《土地登記辦法》 ( ) promulgated by the Ministry of Land and Resources on 30 December 2007 and implemented on 1 February 2008, and the Measures for Building Registration《房屋登記辦法》 ( ) promulgated by the Ministry of Construction on 15 February 2008 and implemented on 1 July 2008, all duly registered land use rights and building ownership rights are protected by the law. According to the Interim Regulations on Real Estate Registration《不動產登記暫行條例》 ( ) promulgated by the State Council on 24 November 2014 and implemented on 1 March 2015, the state applies a uniform registration system over real estate.

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In connection with these registration systems, real estate and land registries have been established in the PRC. In most cities in the PRC, the above systems are maintained separately. However, in certain cities such as Shanghai, the two systems have been consolidated and a single composite real estate and land use rights certificate will be issued evidencing the ownership of both land use rights and the buildings erected on the land.

(h) Establishment of a Real Estate Development Enterprise

According to the Urban Real Estate Law, a real estate developer is defined as an enterprise which engages in the development and sale of real estate for the purpose of making profits. Under the Regulations on Administration of Development of Urban Real Estate《城市房地產開發經營管理條例》 ( ) (the “Development Regulations”) promulgated by the State Council on 20 July 1998 and amended on 08 January 2011, in addition to requirements on establishing enterprises, an enterprise that engages in the development of real estate must satisfy the following requirements: (i) its registered capital must be RMB1 million or more and (ii) it must have four or more full-time professional real estate or construction technicians and two or more full-time accounting officers, each of whom must hold the relevant qualification certificate. The local government of a province, autonomous region or municipality directly under the central government may, based on local circumstances, impose more stringent requirements on the registered capital and the professional personnel of a real estate developer.

To establish a real estate development enterprise, the developer should apply for registration with the administration for industry and commerce on or above the county level. The real estate developer must also report its establishment to the real estate development authority in the location of the registration authority, within 30 days of the receipt of its business license.

According to the “Regulations on Real Estate Developments and Operations of Jilin City”《吉林市城市房地產開發經營管理條例》 ( ) enacted by Jilin Municipal People’s Congress (the standing committees) on 27 September 2003 and came into force on 1 December 2003, a property developer shall satisfy the following requirements: (1) the registered capital shall be no less than RMB5 million, among which self-owned working capital shall be no less than RMB5 million, and (2) at least eight full-time property/construction technicians and two full-time accountants professionals shall be hired, each of whom shall hold the relevant qualifications certificates.

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On 11 July 2006, the Ministry of Construction, the Ministry of Commerce of the People’s Republic of China (“MOFCOM”), the NDRC, the PBOC, the SAIC and the State Administration of Foreign Exchange (“SAFE”) jointly promulgated the Circular on Standardising the Admittance and Administration of Foreign Capital in the Real Estate Market《關於規範房地產市場外資准入和管理的意見》 ( ), which states that: (i) an overseas entity or individual investing in real estate in the PRC other than for personal uses, shall apply for the establishment of a Foreign Invested Real Estate Enterprise (the “FIREE”) in accordance with applicable PRC laws and shall only conduct operations within the authorised business scope after obtaining the relevant approvals from and registering with the relevant governmental authorities; (ii) the registered capital of a FIREE with a total investment of US$10 million or more shall not be less than 50% of its total investment amount, whereas for a FIREE with a total investment of less than US$10 million, the current provision on registered capital shall apply pursuant to the Tentative Regulations of the State Administration for Industry and Commerce on the Proportion of the Registered Capital to the Total Amount of Investment of Sino-foreign Equity Joint Ventures《關於中外合資經營企業註冊資本與投資總額比例的暫行規定》 ( ) which was promulgated on 17 February 1987 by the SAIC; (iii) a newly established FIREE can first obtain an approval certificate and business license which are valid for one year. The official approval certificate and business license can be obtained by submitting the land use rights certificate to the relevant government departments after the land grant premium for the land has been paid; (iv) an equity transfer of a FIREE or the transfer of its projects, as well as the acquisition of a domestic real estate enterprise by foreign investors, must first be approved by the commercial authorities. The investor shall submit a letter to the commercial authorities confirming that it will abide by the land grant contract, the construction land planning permit and the construction work planning permit. In addition, the investor shall also submit the land use rights certificate, the evidence from the construction authorities confirming the alteration of archives and evidence from the tax authorities confirming that tax relating to the transfer has been fully paid; (v) foreign investors acquiring a domestic real estate enterprise through an equity transfer, acquiring the Chinese investors’ equity interest in an equity joint venture or through any other methods shall pay the purchase price from its own capital in a lump sum rather than by instalments and shall ensure that the enterprise’s employees and bank loans are treated and dealt with in accordance with applicable PRC laws; (vi) if the registered capital of a FIREE is not fully paid up, its land use rights certificate has not been obtained or the paid-in capital is less than 35% of the total investment amount of the project, the FIREE is prohibited from borrowing from any domestic or foreign lenders and SAFE shall not approve the settlement of any foreign loans; (vii) the investors in a FIREE shall not in any manner stipulate a fixed return clause or equivalent clause in their joint venture contract or in any other documents; and (viii) a branch or representative office established by a foreign investor in the PRC (other than a FIREE), or a foreign individual working or studying in the PRC for more than one year, is permitted to purchase commodity residential properties located in the PRC only for the purpose of either self-occupation or self-residence. Residents of Hong Kong, Macau and Taiwan and overseas Chinese may purchase commodity residential properties limited to a certain floor area based on their living requirements in the PRC for self-residence purposes.

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On 23 May 2007, the MOFCOM and SAFE jointly issued the Notice on Further Strengthening and Regulating the Approval and Supervision on Foreign Investment in Real Estate Sector in the PRC《關於進一步加強、規範外商直接投資房地產業審批和監管的 ( 通知》) which has the following requirements for approval and supervision of foreign investment in real estate:

(i) foreign investment in the real estate sector in the PRC relating to high-grade properties will be strictly controlled; before obtaining approval for the setup of real estate entities with foreign investment, either both the land use rights certificates and housing ownership right certificates must be obtained, or contracts for obtaining land use rights or housing ownership rights must be entered into;

(ii) entities which have been set up with foreign investment must obtain approval before they expand their business operations into the real estate sector and entities which have been set up with foreign investment for real estate development operation must obtain new approval if they are engaged in new real estate development projects;

(iii) acquisitions of real estate entities and foreign investment in the real estate sector by way of round trip investment will be strictly regulated. Foreign investors must not avoid approval procedures by changing actual controlling persons of domestic real estate enterprises;

(iv) parties to real estate entities with foreign investment should not in any way guarantee a fixed investment return;

(v) local approval authorities should file the approvals of establishment of foreign investment real estate entities with the MOFCOM for their records in a timely manner according to applicable laws;

(vi) foreign exchange administration authorities and banks authorised to conduct foreign exchange business should not effect foreign exchange settlements regarding capital account items to those that fail to file with the MOFCOM or fail to pass the annual reviews; and

(vii) for establishment of real estate entities which are illegally approved by local authorities, (i) the MOFCOM should carry out investigation, order punishment and make rectification, and (ii) foreign exchange administrative authorities should not carry out foreign exchange registrations for such illegally established real estate entities.

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On 18 June 2008, the MOFCOM issued the Notice Regarding the Registration of Foreign-Invested Real Estate Industry《商務部關於做好外商投資房地產業備案工作的通 ( 知》)(“Circular 23”), which requires registrations to be preliminarily examined by the provincial branch of the MOFCOM before submission to the MOFCOM for registration. Pursuant to Circular 23, the MOFCOM may randomly select registered foreign-invested real estate enterprises for examination. For enterprises which are found to be in violation of the existing regulations, their foreign currency registrations shall be cancelled and the foreign investment statistics of such enterprises shall be nullified by SAFE upon the notice from the MOFCOM.

On 24 June 2014, the MOFCOM and SAFE jointly issued the Notice Regarding the Improvement of Registration of Foreign-Invested Real Estate Industry《關於改進外商投 ( 資房地產備案工作的通知》), which adopts an electronic registration system to simplify the registration process and emphasises post-registration governance.

(i) Qualifications of a Real Estate Developer

Under the Development Regulations, the real estate development authorities shall examine applications for registration of qualifications of a real estate developer when it reports its establishment, by considering its assets, professional personnel and business results. A real estate developer shall only undertake real estate development projects subject to the approved qualification registration.

In accordance with the Provisions on Administration of Qualifications of Real Estate Developers《房地產開發企業資質管理規定》 ( ) (the “Provisions on Administration of Qualifications”) promulgated by the Ministry of Construction on 29 March 2000, a real estate developer shall apply for registration of its qualifications according to such Provisions. An enterprise may not engage in development and sale of real estate without a qualification classification certificate for real estate development. The construction authority under the State Council oversees the qualifications of real estate developers throughout the country, and the real estate development authority under a local government on or above the county level shall oversee the qualifications of local real estate developers.

In accordance with the Provisions on Administration of Qualifications, real estate developers are classified into four classes. The approval system is tiered, so that confirmation of class 1 qualifications shall be subject to preliminary examination by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government and then final approval of the construction authority under the State Council. Procedures for approval of developers of class 2 or lower qualifications shall be formulated by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government. A developer that passes the qualification examination will be issued a qualification certificate of the relevant class by the qualification examination authority.

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After a newly established real estate developer reports its establishment to the real estate development authority, the latter shall issue a Provisional Qualification Certificate （《暫定資質證書》）to the eligible developer within 30 days of its receipt of the above report. The valid period of the Provisional Qualification Certificate is one year, and the real estate development authority can extend the period according to the developer’s specific operating circumstances. However, the period of extension may not exceed two years. The real estate developer may apply for qualification classification by the real estate development authority within one month before the expiration of the Provisional Qualification Certificate.

A developer of any qualification classification may only engage in the development and sale of real estate within its approved scope of business and may not engage in business which is limited to another classification. A class 1 real estate developer is not restricted as to the scale of real estate project to be developed and may undertake a real estate development project anywhere in the country. A real estate developer of class 2 or lower may undertake a project with a GFA of less than 250,000 sq.m. and the specific scope of business shall be as confirmed by the construction authority under the people’s government of the relevant province, autonomous region or municipality directly under the central government.

An annual inspection system shall be applicable to the qualifications of real estate development enterprises. Where an enterprise fails to meet the conditions of original qualification or commits any misconduct in its operation, the original authorities for qualification examination and approval shall degrade its qualification grade or nullify its qualification certificate. Where a real estate development enterprise fails to attend the annual inspection without any justified reason, it shall be deemed that such enterprise failed to pass the annual inspection and the original authorities for qualification examination and approval shall nullify the qualification certificate thereof.

Under the Notice on Renewal of Qualification Certificate of a Real Estate Development Enterprise《吉林省住房和城鄉建設廳關於進一步做好全省房地產開發企業行 ( 政許可續期工作的通知》) issued by Jilin Provincial Housing and Urban-Rural Development Department which applies to those real estate enterprises established in Jilin Province on 21 December 2009 and came into force on 1 January 2010, a real estate developer should obtain an approval from the construction authority under the provincial or municipal people’s government (class 1 qualification shall be final approved by Ministry of Housing and Urban-Rural Development), and shall apply for a qualification certificate issued by relevant housing and urban-rural development department in accordance with the rules. The qualifications of real estate developer are categorized into four classes: Class 1, Class 2, Class 3 and Class 4. Different classes of qualification should be examined and approved subject to conditions under respective authorization.

Procedures for assessing real estate developers under Class 2 or with inferior qualifications shall be enacted by the construction authority under the People’s Government of Jilin Province. After the qualification assessment, a qualified developer under a respective class shall be issued a qualification certificate of that specific class by the assessment authority, and the real estate developer under Class 2, Class 3 and Class 4 can hold the qualification certificate for two years’ validity which becomes effective from the date of its issuance as long as the holder complies with respective requirements. The

– II-13 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW real state development authority can extend the validity period for another two years at most after considering the actual business situation of a qualified enterprise. The real estate development enterprise shall apply to local administrative authorities for the extension of a certificate no later than 30 days and no earlier than 75 days before the expiration.

The construction authority of real estate development shall inspect business performance and operation of real estate developers. The inspection is mainly focused on approval documents by planning authorities where the property projects locate, land use right certificates, construction land planning permits, construction work commencement permits, construction work planning permits, qualified completion certificates for completion projects (originals and copies under the seal of property developers), and unfavorable business record (if any).

(j) Development of a Real Estate Project

The Development Regulations provide that a real estate development project may be carried out having regard to the overall land use plan, annual construction land schedule, applicable municipal zoning plan and the annual property development scheme. Those projects which should be approved by the planning control authorities in accordance with the relevant rules should also be reported and approved by the planning control authorities and be brought into the annual planning of the investment in fixed assets.

Under the Foreign Investment Industrial Guidance Catalogue (2015 Revised)《外商 ( 投資產業指導目錄(2015修訂)》) jointly promulgated by the MOFCOM and the NDRC in March 2015, which came into effect on 10 April 2015, construction and operation of villas falls within the category of industries in which foreign investment is prohibited.

Pursuant to the Circular of the State Council on Promulgating the Catalogue of Investment Projects Subject to the Approval of the Government (2014 Edition) (《國務院關於發佈政府核准的投資項目目錄(2014年本)的通知》) issued by State Council on 31 October 2014, which came into effect on the same date, restricted real estate projects and other restricted projects with total investment (including capital increase) of less than US$100 million in the Catalogue for the Guidance of Foreign Investment Industries shall be subject to the approval of provincial-level governments.

Under the Interim Regulations on Grant and Transfer, a system of grant and transfer of the right to use state-owned land is adopted. A land user shall pay a grant price to the state as consideration for the grant of the right to use a land site within a certain term, and the land user may transfer, lease out, mortgage or otherwise commercially exploit the land use right within the term of use. Under the Interim Regulations on Grant and Transfer and the Urban Real Estate Law, the land administration authority under the local government of the relevant city or county shall enter into a grant contract with the land user to provide for the grant of land use right. The land user shall pay the grant price as provided by the grant contract. After payment in full of the grant price, the land user shall register with the land administration authority and obtain a Land Use Rights Certificate which evidences the acquisition of land use rights.

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The Urban Real Estate Law and the Development Regulations provide that, except for land use rights which may be obtained through allocation pursuant to PRC laws or the stipulations of the State Council, land use rights for a site intended for real estate development shall be obtained through grant.

Under the Regulations on the Grant of State-Owned Land Use Rights Through Competitive Bidding, Public Auction and Listing-for-Sale《招標拍賣掛牌出讓國有土地使 ( 用權規定》), which became effective from 1 July 2002, and was revised as Regulations on Granting State-Owned Construction Land Use Right through Tenders, Auction and Listing-for-Bidding《招標拍賣掛牌出讓國有建設用地使用權規定》 ( ) on 28 September 2007 and which came into effect on 1 November 2007, and the Urban Real Estate Law of the People’s Republic of China, state-owned land use rights for the purposes of commercial use, tourism, entertainment and commodity residential property development in the PRC may be granted by the government authorities only through public tender, auction and listing-for-sale.

The Development Regulations also provide that a real estate developer shall record any major events which occur in the course of construction in the Real Estate Development Project Manual and periodically submit the same to the real estate development authority for its records.

Under the Measures for Control and Administration of Grant and Transfer of Right to Use Urban State-owned Land《城市國有土地使用權出讓轉讓規劃管理辦法》 ( ) promulgated by the Ministry of Construction in December 1992 and amended in January 2011, a real estate developer shall apply for Planning Permit for Land Use《建設用地規劃許可證》 ( ) from the urban municipal planning authority.

After obtaining a Planning Permit for Land Use, a real estate developer shall organise the necessary survey, planning and design work with regard to planning and design requirements. For the planning and design proposal in respect of a real estate development project, the relevant report and approval procedures required by the Law of the PRC on Urban and Rural Planning《中華人民共和國城鄉規劃法》 ( ) promulgated by the Standing Committee of the National People’s Congress in October 2007, and local statutes on urban planning must be followed and a Planning Permit for Construction Projects must be obtained from the urban planning authority.

If the state-owned land use right for a construction project within a city or town planning area is appropriated, upon the approval, verification or filing of the relevant department, the construction unit shall apply to the competent department of urban and rural planning under the people’s government of the city or town for permitting the land use for construction, and the department shall issue a land use permit after checking and verifying the location and area of the land used for construction as well as the scope of areas where construction is permitted pursuant to the detailed controlling plans.

If buildings, structures, roads, lines and other engineering structures are to be constructed within a city or town planning area, construction units or individuals shall apply to the competent department of urban and rural planning under the people’s government of the city or county or the people’s government of the town specified by the

– II-15 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW people’s government of the relevant province, autonomous region or municipality directly under the Central Government for the construction project planning permit.

Pursuant to the Circular on Certain Issues Concerning Strengthening Land Supply and Supervision for Real Estate《國土資源部關於加強房地產用地供應和監管有關問題的通 ( 知》) issued by the PRC Ministry of Land and Resources on 8 March 2010, a real estate developer shall file written reports with the department of land and resources upon the commencement and completion of a project. If the real estate developer fails to commence or complete the construction within the period prescribed in the land grant contract, it shall report the reason for delay to the department of land and resources within 15 days before the end of the period. Any real estate developer which fails to file reports shall be prohibited from acquiring land in the PRC for at least one year.

(k) Real Estate Financing

In recent years, the PRC government promulgated various rules and policies to regulate real estate project financing, which may limit the foreign-owned real estate companies’ ability to use bank loans to finance their property projects.

In June 2003, the PBOC issued the Circular on Further Strengthening the Management of Real Estate Credit Business《關於進一步加強房地產信貸業務管理的通 ( 知》) to strengthen the enforcement of lending regulations in the property industry. These measures:

(i) prohibit PRC commercial banks from financing the payment of land premium;

(ii) restrict PRC commercial banks from financing the development of luxury residential properties and villas;

(iii) prohibit PRC commercial banks from granting project loans to property developers if the property developer has not obtained the relevant land use rights certificate, construction land use planning permit, construction planning permit or construction permit, or if the property developer‘s internal funds for the project are less than 30% (which was later raised to 35% under Guidelines on Risk Management for Real Estate Loans Business of Commercial Banks《商業銀行房地產貸款風險管理指引》issued by CBRC on 30 August 2004) of the estimated total capital required for that project; and prohibit property developers from financing property developments with loans obtained from banks in regions outside where the relevant property development is located.

On 12 August 2003, the State Council published the Notice on Facilitating Sustained and Healthy Development of the Real Estate Market《國務院辦公廳關於促進房地產市場持 ( 續健康發展的通知》). This notice provides a series of measures to regulate the real estate market, including but not limited to enhancing the gathering and granting of public housing fund, perfecting the security of housing loans and strengthening the supervision of real estate loans. The purpose of the notice is to create a positive influence on the long-term development of the real estate market in China.

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On 30 August 2004, the CBRC issued the《商業銀行房地產貸款風險管理指引》 ( ). According to Guidelines on Risk Management for Real Estate Loans Business of Commercial Bank, no loans shall be granted to projects which have not obtained the requisite land use rights certificates, construction land planning permits, construction work planning permits and construction work commencement permits. The guideline also stipulated that bank loans shall only be extended to real estate developers that contributed not less than 35% of the total investment of the property development project with its own capital. In addition, the guideline provides that commercial banks shall set up strict approval systems for granting loans.

In September 2007, the PBOC and the CBRC jointly issued the Notice on Strengthening the Administration of Commercial Real Estate Credit Loans《關於加強商業 ( 性房地產信貸管理的通知》) to further regulate the management of loans for commercial real estate. Under this notice, the PRC government has tightened its control over loans from commercial banks to property developers in order to prevent excessive credit granting by such banks. The notice emphasises that commercial banks shall not offer loans to property developers found by state land resource and construction authorities to be hoarding land and buildings. Commercial banks are also prohibited from accepting commercial properties that have been vacant for more than three years as security for loans. The notice implements measures that:

(i) prohibit commercial banks from lending to projects with an internal capital ratio (owners’ equity) of less than 35%, or without a land use rights certificate, construction land use planning permit, construction planning permit and construction permit;

(ii) prohibit commercial banks from lending to property developers solely for the payment of land premium; and

(iii) require commercial properties purchased with loans to have been completed and passed relevant completion acceptance inspections.

On 29 July 2008, the PBOC and the CBRC jointly issued the Notice on Financially Promoting Land Saving and Efficient Use《關於金融促進節約集約用地的通知》 ( ) which, among other things:

(i) restricts the granting of loans to property developers for the purpose of paying land premium;

(ii) provides that, for secured loans for land reserve, legal land use rights certificates shall be obtained, the loan mortgage shall not exceed 70% of the appraised value of the collateral, and the loan term shall be no more than two years in principle;

(iii) provides that for property developers who (1) delay the date of commencement of development specified in the land grant agreement for more than one year, (2) have not completed at least one-third of the intended project, or (3) have not invested at least one-fourth of the intended total project investment, loans shall be granted or extended to them prudently;

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(iv) restricts the granting of loans to property developers whose land has been idle for more than two years; and

(v) prohibits taking idle land as security for loans.

In accordance with the Notice Regarding Adjusting Capital Ratio of Fixed Assets Investment Project《關於調整固定資產投資項目資本金比例的通知》 ( ) promulgated by the State Council on 25 May 2009, the minimum capital ratio for real estate development projects (other than social and ordinary commercial housing projects) is 30%. When providing credit support and services, financial institutions shall carry out independent assessments to prevent financial risks and conduct comprehensive assessments and evaluations on the source of capital, returns on investment and credit risks with reference to the capital ratio requirements promulgated by the state and the actual status of the borrower and the project, and to independently decide whether to grant the loan and the specific amount and proportion of the loan.

On 7 January 2010, the General Office of the State Council issued the Circular on Promoting the Stable and Healthy Development of Real Estate Market《關於促進房地產市 ( 場平穩健康發展的通知》), pursuant to which, financial institutions are required to adhere strictly to requirements regarding internal capital ratios for real estate projects, and are prohibited from advancing funds to developers or projects that do not satisfy the requirements under the relevant credit policies in relation to real estate development.

On 29 September 2010, the PBOC and CBRC jointly issued the Notice on Issues Concerning the Improvement of Differential Housing Credit Policies《關於完善差別化住 ( 房信貸政策有關問題的通知》), pursuant to which all commercial banks are required to suspend the granting of loans for new development projects and to suspend the extension of loans to any real estate developers which have left any land idle, changed the uses and nature of land, delayed the commencement of property projects or the completion of their construction, held back housing units for sale or violated any of laws or regulations.

The Notice on Further Improving Housing Financial Services《關於進一步做好住房 ( 金融服務工作的通知》), promulgated on 29 September 2014 by the PBOC and CBRC, provides that banking financial institutions shall, under the premise of risk control, reasonably allocate credit resources to support qualified real estate developers which operate with integrity in their property development, so as to support their reasonable financing needs for completing property projects with market prospects. The Notice also provides for the expansion of market-oriented financing channels, support for qualified real estate developers to issue debt financing instruments in the interbank bond market, and the active and steady implementation of the pilot scheme of REITs.

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(l) Idle Land

According to the Measures on Disposing Idle Land《閒置土地處置辦法》 ( ) enacted and enforced by the Ministry of Land and Resources on 28 April 1999 and revised on 1 June 2012, land can be classified as idle land under any of the following circumstances:

(i) development and construction of the state-owned land has not commenced within one year after the time limit prescribed in the land use rights grant contract or allocation decision; or

(ii) the development and construction of the state-owned idle land has commenced but the area of which development and construction has commenced is less than one-third of the total area to be developed and constructed, or the invested amount is less than 25% of the total amount of investment, and the development and construction have been continuously suspended for one year or more without any approval.

Where the delay of commencement of development is caused by the government or due to natural disasters, the land administrative authorities shall discuss with the state-owned construction land use rights holder to proceed with one of the following:

(i) extending the time limit for commencing development. The government and the relevant state-owned construction land use rights holder shall enter into a supplemental agreement and specify the revised time limit for commencing development and construction completion and the liability for breach of such agreement. The time limit for commencing development shall not be extended over one year from the date of the commencement of development specified on the supplemental agreement;

(ii) adjusting the land use and planning conditions. The relevant land use procedure shall be revisited and the land grant premium shall be reviewed, collected or returned according to the new land use and/or planning conditions;

(iii) arranging for temporary use for the idle land by the government. The relevant state-owned construction land use rights holder shall resume the development and construction of the idle land when the original project is ready for development and construction. The time limit of temporary use shall not exceed two years from the prescribed start date of temporary use;

(iv) requisition of the use right of the state-owned construction land by the government with compensation;

(v) exchanging the idle land for other land. When the land grant premium of the idle land has been paid up, the project funding has been completed and the idle status is caused by lawful amendment to the plan, the government can offer other state-owned construction land of the same value and use to the

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relevant state-owned construction land use rights holder in exchange. The state-owned construction land use rights holder and the government shall enter into a new land grant contract, which shall specify the land as land offered in exchange; and

(vi) other measures as determined by the relevant city-level and county-level land administrative authorities based on actual circumstances.

Save for the above item (iv), the time limit for commencing development shall be re-calculated according to the newly agreed or stipulated time.

On 8 September 2007, the Ministry of Land and Resources promulgated the Notice on Strengthening the Disposal of Idle Land《關於加大閒置土地處置力度的通知》 ( ), which provides such measures that the surcharge on idle land shall be 20% of the land grant premium in principle, and where confiscation measures were imposed by the law, such measures shall be strictly enforced.

On 3 January 2008, the State Council issued the Notice on Promoting Economical and Intensive Use of Land《關於促進節約集約用地的通知》 ( ), which presses for the full and effective use of existing construction land and the preservation of farm land. The notice also stipulates that the amount of idle land fees for any land left idle for over one year but less than two years shall be equal to 20% of the land premium.

According to the Notice on Promoting Steady and Healthy Development of the Real Estate Market《關於促進房地產市場平穩健康發展的通知》 ( ) issued by the General Office of the State Council on 7 January 2010, the land resource authorities shall strengthen the investigation and handling of idle land.

On 26 January 2011, the State Council issued the Notice on Further Improvement of the Regulation and Control of Real Estate Market《國務院辦公廳 ( 關於進一步做好房地產市場調控工作有關問題的通知》), pursuant to which the qualification certificates and the sources of capital of real estate enterprises will be examined. If a real estate development enterprise fails to obtain a construction permit two years after the land is provided, the land will be confiscated and fines will be imposed accordingly, assuming the land was idle for a least one year.

(m) Demolition and Removal

Under the Regulations on Demolition as repealed by the Regulations on the Expropriation and Compensation of Houses on State-owned Land《國有土地上房屋徵收 ( 與補償條例》) (the “Expropriation Rules”) promulgated by the State Council, which came into effect on 21 January 2011, which superseded the Regulations for the Administration of Demolition and Removal of Urban Housing《城市房屋拆遷管理條例》 ( ) promulgated on 13 June 2001, buildings on state-owned land can be expropriated for public interest reasons, and those owners of expropriated buildings which are located on state-owned land are entitled to fair indemnification. Where a building is expropriated according to law, the corresponding right to use the state-owned land shall be retracted at the same time. Compensation agreements regarding the compensation methods, compensation amount,

– II-20 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW payment terms and other relevant issues shall be entered into between those owners of expropriated buildings and the relevant PRC governmental authorities responsible for the expropriation. The compensation for the value of the expropriated building shall not be less than the market price of a property similar to the expropriated building on the date of announcement of the decision to expropriate the building. The value of the expropriated building shall be assessed by a qualified real estate price assessment institution according to the assessment measures for building expropriation. The compensation shall be paid prior to the relocation. In the event that no compensation agreement is reached within the time limit, the city or county government may make an administrative decision on the compensation according to the application of the relevant PRC governmental authorities responsible for house expropriation and publish a government notice within the area of the expropriation. No entity or individual may compel the expropriated owners to relocate by means of violence, threat or other illegal methods. Property developers are prohibited from participating in relocation arrangements.

(n) Construction

Before commencing any construction work, the developer shall apply for a Permit for Erection of Construction Projects from the construction authority under the local government above the county level according to the Measures for Administration of Granting Permission for Commencement of Construction Works《建築工程施工許可管理 ( 辦法》) promulgated by the MOHURD on 25 June 2014 and became effective from 25 October 2014.

The Building Construction and Municipal Facilities Construction Tender Management Regulations《房屋建築和市政基礎設施工程施工招標投標管理辦法》 ( ) (the “Tender Regulations”) promulgated in June 2001 state that a Tender Appraisal Committee should be set up for the appraisal of the tender for construction works for a project. According to the Tender Regulations, the Tender Appraisal Committee to be organised by the tenderee shall include representatives of the tenderee and relevant specialists selected by the tenderee from a list certified by the construction administration authorities. The number of members of the Tender Appraisal Committee shall be an odd number and shall consist of at least five members. The relevant specialists shall make up no less than two-thirds of the membership. In accordance with the Tender Regulations, if the estimated price of a single construction contract amounts to at least RMB2 million or the total investment of the project is at least RMB30 million, the developer is required to undertake a bidding process for the award of the construction contracts.

Pursuant to the Development Regulations and the Measures for the Administration of the Registration of the Inspection and Acceptance of the Completed Building Construction Works and the Municipal Infrastructure Facilities《房屋建築工程和市政基礎 ( 設施工程竣工驗收備案管理辦法》) promulgated by the Ministry of Housing and Urban-Rural Development of the People’s Republic of China (the “MOHURD”) in October 2009 and the Provisions on Acceptance Examination Upon Completion of Buildings and Municipal Infrastructure《房屋建築工程和市政基礎設施工程竣工驗收規定》 ( ) promulgated by the MOHURD on 2 December 2013, upon the completion of real estate development project, the developer shall arrange for the examination of the project and file the construction completion examination and acceptance report with the competent

– II-21 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW department of real estate development of the local people’s government at or above county level, where the project is located within 15 days after the acceptance examination is completed.

According to the Law of the People’s Republic of China on the Administration of Urban Real Estate《中華人民共和國城市房地產管理法》 ( ) (Revised in 2007), where a real estate development enterprise develops real estate in phases, the investment in each phase shall be commensurate with the scale of the project. The funds for each phase shall be contributed on schedule for project construction in accordance with the contract for the grant of land use rights.

According to the Administrative Regulations on Urban Real Estate Development and Operation《城市房地產開發經營管理條例》 ( ) enacted on 20 July 1998 and enforced on 8 January 2011, where a cluster residential real estate development project is undertaken in phases, acceptance checks may be carried out in phases.

(o) Warranty and Maintenance of Buildings

Under the Regulations on Quality Management of Construction Projects《建設 ( 工程質量管理條例》) which was promulgated by the State Council on 30 January 2000, when a construction contractor hands over a construction completion examination and acceptance report, it should provide the Quality Guarantee, which should specify scope, term and responsibilities of the warranty as to the quality of the construction.

According to the Measures on the Warranty and Maintenance of Building Construction Projects《房屋建築工程質量保修辦法》 ( ) which was promulgated by the Ministry of Construction on 30 June 2000, in normal circumstances, the warranty and maintenance period for different parts of a construction project should not be shorter than the following:

(i) the reasonable use as stipulated by the project design documents for the groundwork foundation and main body structure project;

(ii) five years for anti-leakage project of the roofs, toilets, rooms and the outer walls;

(iii) two heating periods/cooling periods for the heating and cooling system; and

(iv) two years warranty periods for electrical pipelines and wires, water supply and drainage pipelines, and equipment installation; and

(v) two years for decoration projects.

The warranty and maintenance period of other parts of the construction projects may be determined by agreement between the real estate developers and the builder.

(p) Leases of Buildings

Both the Interim Regulations on Grant and Transfer and the Real Estate Law permit leasing of granted land use rights and the buildings or homes constructed on the land.

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Leasing of properties situated in urban areas has been governed by the Measures for Administration of Leasing of Urban Building《城市房屋租賃管理辦法》 ( ) prior to 1 February 2011 and is governed by the Administrative Measures for Commodity House Leasing ( 《商品房屋租賃管理辦法》) (the “Leasing Measures”) since 1 February 2011. The Leasing Measures permit property owners to lease their properties to others for residential or commercial property uses except as otherwise prohibited by relevant law. The landlords and tenants who are the parties to a property lease transaction are required to enter into a written lease agreement specifying all of the terms of the lease arrangement as required by statute. Leasing of buildings and the underlying land use rights shall not exceed 20 years under the Contract Law of People’s Republic of China《中華人民共和國合同法》 ( ). The lease agreement becomes effective upon signing under the Contract Law of PRC; however, it must be registered with the relevant real estate administration authority at the municipality or county level within 30 days after its execution for the purpose of protecting the tenant’s interest against claims from third parties. A tenant may, upon obtaining consent from the landlord, assign or sublet the premises to sub-tenants. In addition, the Leasing Measures further strengthens the administration of leasing by stipulating more specific procedural rules for lease registration with local real estate administration authority.

On 30 July 2009, the Supreme People’s Court issued the Interpretation of Certain Issues concerning the Application of Law for Judging Disputes over Urban Building Leasing Contracts《關於審理城鎮房屋租賃合同糾紛案件具體應用法律若干問題的解釋》 ( ) which became effective on 1 September 2009 (the “Leasing Interpretation”). The Leasing Interpretation clarifies that courts should not uphold the claim that a building leasing contract is invalid due to the failure of registration. However, if parties agreed on such registration being a condition precedent to the effectiveness of building leasing contract, the agreement prevails, unless that one party has performed major obligations which were accepted by the counter party.

(q) Insurance

There are no nationwide mandatory requirements in the PRC laws, regulations or governmental rules requiring a real estate developer to maintain insurance for its real estate projects. According to the Construction Law of the People’s Republic of China ( 《中華人民共和國建築法》) promulgated by the Standing Committee of the NPC on 1 November 1997 (which came into effect on 1 March 1998) and amended on 22 April 2011, construction enterprises shall pay the premium for industrial injury insurance for employees to participate in such insurance. Construction enterprises are also encouraged to maintain accidental injury insurance and pay the relevant insurance premium for employees engaging in dangerous operations.

(r) Major Environmental Protection Requirements

Pursuant to Law of the People’s Republic of China on Environment Impact Assessment《中華人民共和國環境影響評價法》 ( ) enacted on 28 October 2002, the state practices classified management over the appraisals of environmental impacts of construction projects according to the seriousness of the impacts.

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The construction entities shall organize to work out the report of environmental impacts and the report form of environmental impacts or to fill in the registration form of environmental impacts according to the following principles:

(i) If the environmental impacts may be serious, it shall work out a report of environmental impacts so as to conduct an all-round appraisal the environmental impacts;

(ii) If the Environment Impact may be gentle, it shall work out a report form of environmental impacts so as to conduct an analysis or special environment impact assessment;

(iii) If Environment Impact may be very small so that it is not necessary to conduct an environment impact assessment, it shall fill in a registration form of environmental impacts.

The list of classified management of environment impact assessment of the construction projects shall be determined and published by the administrative department of the State Council in charge of environmental protection.

Pursuant to Administrative Regulations on the Environmental Protection of Construction Projects《建設項目環境保護管理條例》 ( ) enacted on 29 November 1998, for construction projects that are built in phases, go into production or are delivered for use in phases, acceptance checks for their corresponding environmental protection facilities shall be conducted in phases. Competent departments of environmental protection administration shall, within 30 days starting from the date of receipt of the application for acceptance checks on completion of construction of the environmental protection facilities, complete the acceptance checks.

Whoever commits any of the following acts in violation of the provisions of these Regulations shall be ordered by the competent department of environmental protection administration responsible for the examination and approval of the construction project environmental impact report, environmental impact statement or environmental impact registration form to make up the formalities within a given time period; whoever fails to make up the formalities on expiry of the given time period and start construction without authorization shall be ordered to stop the construction and may be imposed a fine of less than RMB100,000:

(i) Failure to file an application for approval of the construction project environmental impact report, environmental impact statement or environmental impact registration form;

(ii) Failure to file a new application for approval of the construction project environmental impact report, environmental impact statement or environmental impact registration form in the event of major changes taking place in the nature, scale, location or production techniques adopted of the construction project; and

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(iii) Failure to submit the construction project environmental impact report, environmental impact statement or environmental impact registration form to the original examination and approval authority for re-examination and re-verification of the construction project that starts construction on the expiration of five years starting from the date of approval of the construction project environmental impact report, environmental impact statement or environmental impact registration form.

Whoever starts construction without authorization, without the approval of the construction project environmental impact report, environmental impact statement or environmental impact registration form or without the consent upon re-examination and re-verification of the original examination and approval authority shall be ordered by the competent department of environmental protection administration responsible for the examination and approval of the said construction project environmental impact report, environmental impact statement or environmental impact registration form to stop the construction, restore the original state within the given time period, and may be imposed a fine of no more than RMB100,000.

In accordance with the Environmental Protection Law of the People’s Republic of China《中華人民共和國環境保護法》 ( ) adopted by the Standing Committee of the NPC on 26 December 1989, which was amended on 24 April 2014 and came into effect on 1 January 2015, the Administration Supervisory Department of Environmental Protection of the State Council sets the national guidelines for the discharge of pollutants. The people’s governments of provinces, autonomous regions and municipalities directly under the central government may also set their own guidelines which are more stringent than the national standards for the discharge of pollutants within their own provinces or districts in the event that the national guidelines are inadequate and submit the same to the competent department of environmental protection under the State Council for record.

The state implements a pollution discharge license management system. Companies with a pollution discharge license are permitted to discharge pollutants according to the requirements specified in the license; those that fail to obtain a pollution discharge license are not permitted to discharge pollutants. In preparing for the relevant development and utilisation plans and the construction of projects that would affect the environment, an environmental impact assessment shall be conducted in accordance with the law. Any development and utilisation plan for which an environmental impact assessment has not been conducted in accordance with the law may not be implemented; any construction project for which an environmental impact assessment has not been conducted in accordance with the law may not commence construction.

A company or enterprise which causes environmental pollution and discharges other pollutants which endanger the public should implement environmental protection methods and procedures into their business operations. This may be achieved by setting up a system of accountability within the company’s business structure for environmental protection; adopting effective procedures to prevent environmental hazards such as waste gases, water and residues, dust powder, radioactive materials and noise arising from production, construction and other activities from polluting and endangering the

– II-25 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW environment. The environmental protection system and procedures should be implemented simultaneously with the commencement of and during the operation of construction, production and other activities undertaken by the company.

Key entities that discharge pollutants shall install and use monitoring equipment in accordance with the relevant state provisions and monitoring standards, ensure the normal operation of such monitoring equipment, and keep the original monitoring record. These companies and entities shall also truthfully disclose the names of their main pollutants, how such pollutants are discharged, the emission concentration, total emissions, any excessive emissions as well as the construction and operation of pollution prevention and control facilities, and be subject to social supervision. If they do not disclose or untruthfully disclose environmental information in violation of the law, the competent departments of environmental protection at county-level or above shall order them to disclose such information, impose fines and publicise the relevant violation. In respect of construction projects for which environmental impact reports are required by the law, the developer shall, when preparing the reports, disclose and explain to the public that may be affected and solicit their opinions.

Where an environmental protection tax is levied, no fees for pollutant discharge shall be imposed.

If a company or enterprise illegally discharges pollutants, it may be fined and ordered to rectify the matter. If a company or enterprise discharges pollutants in excess of the relevant pollutant discharge standards or the relevant total emission control indicators for key pollutants, the competent departments of environmental protection at county-level or above may order them to take measures such as restricting production and suspending production for system improvement; in serious cases, reports shall be made to the people’s government with approval authority for approval and the relevant entity may be ordered to suspend production and be shut down.

Under the Provisions on the Inspection and Acceptance of Environmental Protection of Construction Projects《建設項目竣工環境保護驗收管理辦法》 ( ) promulgated by the State Environmental Protection Administration of China on 27 December 2001, each construction project completed is subject to the inspection of the competent environmental protection administrative authorities, and only after the construction project has passed the inspection and acquired the acceptance approval, can it be put into use.

(s) Sale of Commodity Properties

Under the Measures for Administration of Sale of Commodity Properties《商品房銷售 ( 管理辦法》) (the “Sale Measures”) promulgated by the Ministry of Construction on 4 April 2001, which became effective on 1 June 2001, the sale of commodity properties can include both sales prior to and after the completion of the properties.

Permit for pre-sale of commodity properties

Any pre-sale of commodity properties must be conducted in accordance with the Measures for Administration of Pre-sale of Commodity Properties《城市商品房預售 (

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管理辦法》) promulgated by the Ministry of Construction on 15 November 1994, as amended on 15 August 2001 and 20 July 2004, respectively (the “Pre-sale Measures”).

The Pre-sale Measures provide that any pre-sale of commodity properties is subject to specified procedures. If a real estate developer intends to sell commodity properties in advance, it shall apply to the real estate administrative authority to obtain a pre-sale permit. The pre-sale of commodity properties is required to meet the following conditions:

(i) the relevant land grant premium having been fully paid up and a land use rights certificate having been obtained;

(ii) a construction work planning permit and a construction work commencement permit having been obtained; and

(iii) 25% or more of the total investment in the project having been invested and the progress of construction and the completion and delivery dates having been properly determined.

Supervision on proceeds of pre-sale of commodity properties

Under the Pre-sale Measures and the Urban Real Estate Law, the proceeds from pre-sale of commodity buildings may only be used to fund the property development costs of the relevant projects.

On 13 April 2010, the MOHURD promulgated the Notice on Further Strengthening the Supervision and Administration of Real Estate Market and Improving the System for Pre-sale of Commodity Housing《關於進一步加強房地產 ( 市場監管完善商品住房預售制度有關問題的通知》), which stipulates, among other things, that:

(i) for commodity housing projects which have not obtained pre-sale permits, real estate developers shall not conduct any pre-sale activities, or collect fees from purchasers in the form of a deposit or reservation fee for accepting a subscription or reservation, offering priority or distributing VIP cards, and shall not engage in any sales exhibition. For those which have obtained pre-sale permits, real estate developers shall announce the properties permitted to be sold all at once and the price of each property within ten days, and sell the properties strictly at the prices reported and posted. Real estate developers shall not sell the properties that are reserved for themselves to any third parties prior to the initial title registration, or pre-sell the commodity properties with an agreement to refund the purchase price or to lease back the property, or engage in any false transactions;

(ii) a pre-sale permit shall cover at least a building, and shall not be granted by floor or unit;

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(iii) real estate developers shall sell commodity housing according to the pre-sales plans. Major alteration to the pre-sale plans shall be reported to the competent authority and be publicly announced;

(iv) the names of the actual purchasers shall be strictly required in the sale of commodity housing, and any changes to the names of the purchasers without due approval are not allowed after subscription. A pre-sale shall be rescinded if the purchaser does not enter into a pre-sale contract within the time limit after subscription, and the relevant property may be sold to the public upon rescission; and

(v) the mechanism for the supervision of pre-sale proceeds shall be improved. For areas where a system for supervision of pre-sale proceeds has been set up, measures shall be taken to promote the system. For areas where such system has not been set up, regulations relating to the supervision of pre-sale proceeds shall be put in place as soon as possible. All the pre-sale proceeds of commodity properties shall be put into custodial accounts, which shall be supervised and managed by relevant regulatory authorities in order to ensure the proceeds are used only for the construction of the relevant commodity properties. Pre-sale proceeds may be allocated according to the construction progress, provided that adequate funds have been reserved for completion and delivery of the relevant project.

Sales after completion of commodity properties

Under the Sale Measures, commodity properties may be put to sale post-completion only if the following pre-conditions have been satisfied:

(i) the real estate developer offering to sell the properties post-completion shall have a business license and a real estate developer qualification certificate;

(ii) the developer has obtained a land use rights certificate or other land use approval documents;

(iii) the developer has obtained the construction project planning permit and the construction work commencement permits;

(iv) the construction of the commodity properties has been completed, inspected and accepted as qualified;

(v) the relocation of the original residents at the properties has been settled;

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(vi) the supply of water, electricity, heating, gas and communication and other essential ancillary facilities and public facilities have been made ready for use, or the construction schedule and delivery date of such facilities have been specified; and

(vii) the property management plan has been completed.

The Provisions on Sale of Commodity Properties at Clearly Marked Price (《商品房銷售明碼標價規定》) were promulgated by the NDRC on 16 March 2011 and became effective on 1 May 2011. According to the provisions, real estate developers or real estate agencies are required to mark the selling price explicitly and clearly for both newly-built and second-hand commodity properties. The provisions require real estate operators to clearly indicate the prices and relevant fees of commodity properties, as well as other factors affecting the prices of the commodity properties to the public. With respect to real estate development projects that have received property pre-sale permits or have completed the filing procedures for the sale of completed properties, real estate operators shall announce the commodity properties available for sale all at once within the specified time limit. Furthermore, with regard to a property that has been sold out, real estate operators are obliged to disclose the information and to disclose the actual transaction prices. Real estate operators cannot sell commodity properties beyond the explicitly marked price or charge any other fees not explicitly marked. Moreover, real estate operators may neither mislead properties purchasers with false or irregular price-marking, nor engage in fraud by employing false or misleading price-marking methods.

On 26 February 2013, the General Office of the State Council issued the Notice on Continuing the Regulation of Real Estate Market《關於繼續做好房地產市場調控 ( 工作的通知》) which is intended to cool down the property market and to emphasise the government’s determination to strictly enforce the relevant regulatory and macro-economic measures, which included, among other things, (i) home purchase restrictions, (ii) increased down payment requirements for the purchase of second residential properties, (iii) suspension of mortgage financing for purchase of third or more residential properties; and (iv) levy of 20% individual income tax on the gain from the sale of properties.

According to the “Notice On Relevant Issues Concerning the Regulations on Real Estate Development and Construction”《吉林省住房和城鄉建設廳關於規範房 ( 地產開發建設有關問題的通知》) issued by Jilin Provincial Housing and Urban-Rural Development Department on 21 June 2012, real estate developers can deliver housing to buyers, only if the ancillary infrastructure facilities, including but not limited to, supplying water, electricity, heats, gas and cables have been made ready for use, and other ancillary essential facilities and public facilities have been made ready for use, or the schedule of construction and delivery date of the above have been specified.

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Before a real estate project has been registered, in the real estate development authority at the county level or above, the developer shall deposit the fees for construction safety protection and civilized construction measures in the designated bank account. The property maintenance fee shall be first paid by the real estate developer based on the gross floor area stated in the commodity housing sale and purchase contracts at the same time the contract is registered with the real estate development authority. With the invoice issued for the purpose of maintenance fee, the real estate developer could claim it back from the buyer when the commodity housing is delivered. As regards the quality security deposit for construction projects, all levels of the construction administration shall impose a standard of 1% of the total amount of the construction projects with respect to public projects and 3% of the total amount of the construction projects with respect to residential projects.

(t) Housing loans to individual buyers

On 24 May 2006, the State Council, State Administration of Taxation, Ministry of Finance, Ministry of Land and Resources, Ministry of Supervision, National Development and Reform Commission, the CBRC, The People’s Bank of China and Ministry of Construction jointly promulgated a Notice on Distributing the Opinions of the Departments Including the Ministry of Construction on Adjusting the Housing Supply Structure and Stabilizing the Housing Price《國務院辦公廳關於轉發建設部等部門關於調整 ( 住房供應結構穩定住房價格意見的通知》). In accordance with the Notice, in order to suppress the excessive increase of housing price, from 1 June 2006, the proportion of first installment of individual housing mortgage loans shall be no lower than 30% of the total price. However, considering the demands for residential housing by medium-and-low-income people, the purchase of housing for personal uses with set floor area no more than 90 square meters shall still be subject to the provision of which the first installment shall be no less than 20% of the total price.

The Notice on Strengthening the Administration of Commercial Real Estate Credit Loans《關於加強商業性房地產信貸管理的通知》 ( ), promulgated on 27 September 2007, provides that the down payment requirement applicable to a purchaser acquiring the second residential property shall not be less than 40% of the total price and the interests rate on these loans shall not be less than 1.1 times of the benchmark interest rate of the same kind and same term published by the PBOC. Under the Complementary Notice on Strengthening the Administration of Commercial Real Estate Credit Loans《關於加強商業 ( 性房地產信貸管理的補充通知》), promulgated on 5 December 2007, the frequency of the mortgage loans shall be counted based on the debtor’s family other than the debtor himself/herself, which means, if a family member (including the debtor him/herself, his/her spouse and his/her juvenile child) has purchased a house with the loans, any member of the family within the above range who then purchases another house will be regarded as a second-time house buyer.

The Notice on Promoting the Steady and Healthy Development of the Real Estate Market《關於促進房地產市場平穩健康發展的通知》 ( ) issued on 7 January 2010 provides that for the families (including the debtors, their spouses and their juvenile children) who have bought a residential house with loans and are applying for loans to purchase the

– II-30 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW second residential house or more residential houses, the down payments of the loans shall be not less than 40% of the total price and the interests rates of the loan rates shall be strictly commensurate with the credit risks.

On 17 April 2010, the State Council issued the Notice on Strictly Restraining the Excessive Growth of the Property Prices in Some Cities《關於堅決遏制部分城市房價過快 ( 上漲的通知》), pursuant to which, a stricter differential housing credit policy shall be enforced. It provides that, among other things, (i) for a family member who is a first-time house buyer (including the debtor himself/herself, his/her spouse and his/her juvenile child, similarly hereinafter) of the apartment with a GFA more than 90 sq.m, a down payment of no less than 30% of the total price shall be paid; (ii) for a family who applies loans for its second house, the minimum down payment requirement is raised to at least 50% from 40% and also provides that the applicable mortgage interest rate must be at least 1.1 times of that of the corresponding benchmark interest rate over the same corresponding period published by the PBOC; and (iii) for those who purchase three or more houses, even higher requirements on both down payments and interest rates shall be levied. In addition, the banks may suspend housing loans to buyers who have purchased their third or more houses in places where house prices rise excessively rapidly and high and housing supply is insufficient.

On 26 May 2010, the MOHURD, the PBOC and the CBRC jointly promulgated Circular on the Determination Criteria of Second Residential Property in Individual Commercial Housing Loan Applications《關於規範商業性個人住房貸款中第二套住房認定 ( 標準的通知》). The circular outlines the determining criteria of a property being identified as an individual’s second residential property in individual commercial housing loan applications. The circular provides that the number of residential properties owned by an individual loan applicant shall be determined with reference to the number of completed residential properties actually owned by the members of the family (including the individual loan applicants, their spouses and juvenile children) of the individual who plans to purchase another residential property with the use of individual commercial housing loans. The application or authorisation of any individual commercial housing loan by an individual loan applicant shall be subject to checks on the loan applicants’ residential property registry records through the property registration information system and the issuance of written results of such checks by the urban real estate competent authorities. The lender shall implement a differential credit policy for the individual loan applicants’ second (or above) residential property in accordance with the number of residential properties owned by such applicants. The policy in this circular is also applicable to non-residents who can provide local tax clearance certificates or local social insurance payment certificates for one year or above.

The Notice on Relevant Issues Regarding the Improvement of Differential Mortgage Loan Policies《關於完善差別化住房信貸政策有關問題的通知》 ( ), issued on 29 September 2010, raises the minimum down payment to 30% of the total purchase price for all first-time house buyers with mortgage loans; and requires commercial banks in China to suspend mortgage loans to customers for their third or more residential property purchase, and non-local residents who are unable to provide documentation certifying payment of local tax or social security for longer than a one-year period.

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On 2 November 2010, the MOHURD, the Ministry of Finance, the PBOC and the CBRC jointly promulgated the Circular on Regulations of Policies Concerning Individual Housing Provident Fund Loans《關於規範住房公積金個人住房貸款政策有關問題的通知》 ( ) and regulations in relation to Individual Housing Provident Fund Loans. The circular provides that Individual Housing Provident Fund Loans shall only be used in purchasing, building, re-building and overhauling ordinary and privately used residential properties of labourers with the aim of meeting their basic needs for housing. The use of Individual Housing Provident Fund Loans to carry out speculative purchase of properties is strictly prohibited. To purchase the first residential property for private use with Individual Housing Provident Fund Loans, the down payment of the purchase shall not be less than 20% of the total purchase price for a property with a GFA less than 90 sq.m (inclusive). For a property with a GFA more than 90 sq.m, the down payment shall not be less than 30% of the total purchase price. For the purchase of the second residential property, Individual Housing Provident Fund Loans are only available to labourers whose family’s per-capita gross floor area is lower than the local average, and the loans could only be used to purchase ordinary and privately used residential properties that help improve the living conditions of the labourers. The down payment for the purchase of the second residential property shall not be less than 50% of the total purchase price, and the interest rate of the loan shall not be less than 1.1 times of the interest rate for Individual Housing Provident Fund Loans in relation to the purchase of the first residential property during the same period. Individual Housing Provident Fund Loans are not available to labourers and their families for purchasing the third (or more) residential property.

Notice of the People’s Bank of China and the China Banking Regulatory Commission on Further Improving Housing Financial Services《關於進一步做好住房金融 ( 服務工作的通知》), promulgated on 29 September 2014 by the PBOC and CBRC, provides that as regards a household that obtains a loan to purchase the first ordinary owner-occupied residential property, the minimum down payment ratio of the loan shall be 30%, and the floor of the loan interest rate shall be 0.7 times the benchmark lending rate. Banking financial institutions shall determine the specifics in this regard. Where a household that owns an existing property for which the property purchase loan has been paid off applies for a new loan to purchase another ordinary commodity housing for the purpose of improving living conditions, the relevant banking financial institution shall adopt the lending policies applicable to the first owner-occupied property. In cities where the control measures on property purchase have been canceled or are not implemented, if a household that owns two or more existing properties for which the property purchase loans have been paid off applies for a new loan to purchase yet another new property, the relevant banking financial institution shall specifically determine the down payment ratio and the loan interest rate in a prudent manner based on the borrower’s repayment capability, credit standing and other factors. A banking financial institution may, according to the local urbanisation development planning, disburse housing loans to non-local residents who satisfy policy conditions.

Pursuant to the circular of the People’s Bank of China, Ministry of Housing and Urban-Rural Development and China Banking Regulatory Commission on Issues concerning Individual Housing Loan Policies《關於個人住房貸款政策有關問題的通知》 ( ), issued on 30 March 2015, for a family who buys on loan its first ordinary house for self-use, and has not paid off the loan on its first house and applies again to buy on

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If a family member (the borrower and the borrower’s spouse and their juvenile children) use personal housing provident fund loan for the purchase of the first ordinary self-use house, the down-payment proportion shall be no lower than 20%. For the families who have paid off the housing provident fund loan of its first house and apply to buy with housing provident fund loan for a second ordinary commodity house for the purpose of improving living conditions, the down payment ratio of the loans shall be not less than 30%.

Under the Notice of Jilin Provincial Construction Department on Further Promoting the Stable and Healthy Development of the Real Estate Market《吉林省建設廳關於進一步 ( 促進全省房地產市場平穩健康發展的通知》) issued on 18 March 2010, for the employees who have purchased ordinary commodity housing and social security housing using their housing provident fund, the down payment ratio shall be no less than 20%.

(u) Measures on Stabilising Housing Prices

On 26 March 2005, the General Office of the State Council promulgated the Notice on Effectively Stabilizing House Prices《關於切實穩定住房價格的通知》 ( ) to restrain the excessive increase of housing prices and to promote the sound development of the real estate market. The notice provides that housing prices should be stabilised and the system governing housing supply should be vigorously adjusted and improved. In accordance with the notice, seven departments of the State Council, including the Ministry of Construction, issued the Opinion on Stabilising Housing Prices《關於做好穩定住房價格工 ( 作的意見》) on 30 April 2005. The opinion states, among other things, that

(i) local governments should focus on ensuring the supply of low-to-medium-end ordinary residential houses while controlling the construction of low density and high-end residential houses;

(ii) to curb any speculation in the real estate market, the business tax would be levied from 1 June 2005 on the total revenue arising from any transfer by individuals of residential houses within two years from their purchase thereof or on the difference between the transfer price and the original price for any transfer of non-ordinary houses by individuals after two or more years from their initial purchase thereof; and

(iii) the real estate registration department will no longer register the transfer of pre-sold houses before the buyers obtain the relevant property ownership certificates.

On 24 May 2006, the General Office of the State Council promulgated the Notice on Adjusting the Housing Structure and Stabilising Housing Prices《關於調整住房供應結構 ( 穩定住房價格意見的通知》).

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The notice provides for the following broad directives to, among other things:

(i) encourage mass-market residential developments and curb the development of high-end residential properties;

(ii) enforce the collection of the 5% business tax on property sales (business taxes shall be levied on the entire sale price of any property sold within five years, or on the profit arising from any property sold after five years subject to possible exemptions for ordinary residential properties);

(iii) restrict housing mortgage loans to not more than 70% of the total property price (for houses purchased for self-residential purposes and with a GFA of less than 90 sq.m, the owners are still able to apply for a housing mortgage up to an amount representing 80% of the total property price);

(iv) halt land supply for villa projects and restrict land supply for high-end and low-density residential projects;

(v) moderate the progress and scale of demolition of old properties for re-development;

(vi) require local governments to ensure that units of less than 90 sq.m in size shall account for over 70% of the total development and construction area (with any exceptions requiring the approval of the Ministry of Construction); and

(vii) prevent banks from providing loans to a property developer whose total capital fund is less than 35% of the total investment amount in an intended development project.

On 6 July 2006, the Ministry of Construction promulgated certain opinions regarding the Implementation of the Ratio Requirements for the Structure of Newly constructed Residential Units《關於落實新建住房結構比例要求的若干意見》 ( ) (the “New Opinions”). The New Opinions stipulate that residential units with a GFA of less than 90 sq.m shall account for over 70% of the total area of residential units which are newly approved and constructed in each city or county after 1 June 2006. The relevant local government shall have the authority to determine the configuration of newly constructed property. Pursuant to the Opinions on Solving Housing Shortage for Urban Low-income Households《關於解決城市低收入家庭住房困難的若干意見》 ( ) promulgated by the State Council on 7 August 2007, each local authority shall adjust the housing supply structure in order to:

(i) implement the Notice of the General Office of the State Council on Forwarding the Opinions of the Ministry of Construction and other Ministries on Adjusting the Housing Supply Structure and Stabilizing the Housing Prices《國務院辦公廳轉發建設部等部門關於調整住房供應結構穩定住房價格意 ( 見的通知》);

(ii) focus on the development of low to medium-priced, and small to medium-sized commodity housing; and

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(iii) increase the supply of housing.

The approval percentage of new housing construction (with a GFA of less than 90 sq.m) shall be more than 70% of the total housing development area. The annual supply of low rental housing construction land, economy-sized housing and low to medium-priced and small to medium-sized commodity housings shall not be less than 70% of the total residential housing land. Pursuant to the Notice on Implementation of the Opinions of the State Council on Solving Housing Shortage for Urban Low-income Households to Further Adjust Land Supply《關於認真貫徹 ( 〈國務院關於解決城市低收入家庭住房困難的若干意見〉進一步加強土地供應調控的通知》) promulgated by Ministry of Land and Resources on 30 September 2007 and amended on 3 December 2010, the administration department of the Ministry of Land and Resources at both municipality and county levels shall give priority to arranging land supply for low rental housing, economy-sized housing and low to medium-priced and small to medium-sized commodity housing. The annual supply volume shall not be less than 70% of total residential land supply.

On 7 January 2010, the General Office of the State Council issued the Notice on Promoting the Steady and Healthy Development of the Real Estate Market《關於促進房地 ( 產市場平穩健康發展的通知》), which provides that, among other things, land resource authorities shall strengthen supervision of the compliance of the contracts and strictly collect land premiums according to land grant contracts, and shall:

(i) effectively increase the supply of social welfare housing and ordinary commodity residential properties, in particular, low to medium-priced and small to medium-sized ordinary commodity residential properties;

(ii) direct consumers to make reasonable purchases of residential properties and discourage investment and speculation in the housing market;

(iii) strengthen credit risk management for real estate projects and market supervision;

(iv) speed up the construction of social welfare housing projects; and

(v) setting or clarifying the responsibilities of provincial and local governments.

On 8 March 2010, the Ministry of Land and Resources issued the Notice on Strengthening the Supply and Supervision of Land Use for Real Estate Property (《關於加強房地產用地供應和監管有關問題的通知》). The notice, among other things, provides that:

(i) the land and resources bureau at city and county levels shall ensure that the land supply for government-subsidised housing, slum-dwellers reconstruction and small commercial housing units for self-housing shall not be less than 70% of the total residential land supply and strictly control the land supply for large-sized apartments and restrict the land supply for villas;

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(ii) land resource authorities shall prohibit property developers who owe land grant premium payments, possess idle land, engage in land speculation and price manipulation, conduct project development exceeding approved scope or fail to conform with the land use rights grant contract from land bidding transactions within a set period of time; and

(iii) the land use rights grant contract shall be executed within ten days after a grant of land has been mutually agreed and a down payment of 50% of the land grant premium shall be paid within one month from the execution of the land use rights grant contract with the remaining amount paid no later than one year after the execution of the land use rights grant contract.

On 21 September 2010, the Ministry of Land and Resources and the MOHURD jointly promulgated the Notice on Further Strengthening Control and Regulation of Land and Construction of Property Development《關於進一步加強房地產用地和建設管理調控的 ( 通知》), which stipulates, among other things, that:

(i) at least 70% of land designated for construction of urban housing shall be used for affordable housing, housing for resettlement of shanty towns and small to medium-sized ordinary commercial housing; in areas with high housing prices, the supply of land designated for small to medium-sized, price-capped housing shall be increased;

(ii) developers and their controlling shareholders are prohibited from participating in land auctions before the rectification of certain misconduct, including (i) illegal transfer of land use rights; (ii) failure to commence required construction within one year from the delivery of land under land grant contracts due to such developers’ own reasons; (iii) non-compliance with the land development requirements specified in land grant contracts; and (iv) crimes such as obtaining land by forging official documents and illegal land speculation;

(iii) developers are required to commence construction within one year from the date of delivery of land under the relevant land grant contract and complete construction within three years of commencement;

(iv) development and construction of projects of low-density and large-sized housing shall be strictly limited and the plot ratio of the planned GFA to the total site area of residential projects shall be more than one; and

(v) the grant of two or more bundled parcels of lands and undeveloped land is prohibited.

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On 19 December 2010, the Ministry of Land and Resources promulgated the Notice on Strict Implementation of Policies Regarding Regulation and Control of Real Estate Land and Promotion of the Healthy Development of Land Markets (《關於嚴格落實房地產用地調控政策促進土地市場健康發展有關問題的通知》), which, among other things, provides that (i) cities and counties that have less than 70% of their land supply designated for affordable housing, redevelopment housing for shanty towns or small to medium-sized residential units shall not provide land for large-sized and high-end housing until the end of 2010; (ii) local land and resources authorities shall file a transaction report with the Ministry of Land and Resources and provincial land and resources authorities, respectively, in relation to land sold via competitive bidding, auction and listing-for-sale with a 50% or more premium; and (iii) for land designated for affordable housing but used for the development of commodity houses, any illegal income derived therefrom will be confiscated and the relevant land use rights will be revoked. In addition, unapproved changes to the plot ratio are strictly prohibited.

On 26 January 2011, the General Office of the State Council issued the Notice on Issues Concerning Further Improvement of the Control on Real Estate Market《進一步 ( 做好房地產市場調控工作有關問題的通知》). This notice, among other things, provides that:

(i) individuals selling housing properties within five years of purchase shall be charged business taxes on the full amount of sale price, whether ordinary or non-ordinary;

(ii) the minimum down payment for second home purchases increases from 50% to 60%;

(iii) a property developer, who fails to obtain the construction work commencement permit and commence development for more than two years from the commencement date stipulated in the land grant contract, shall forfeit the land use rights and the PRC government shall impose an idle land fee of up to 20% of the land premium on such property developer; and

(iv) municipalities directly under the central government, municipalities with independent planning status, provincial capitals and cities with high housing prices shall limit the number of homes local residents can purchase in a specific period.

In principle, local resident families that own one house and non-local resident families who can provide local tax clearance certificates or local social insurance payment certificates for a required period are permitted to purchase only one additional house (including newly built houses and second-hand houses). Sales of properties to (i) local resident families who own two houses or more, (ii) non-local resident families who own one house or more, and (iii) non-local resident families who cannot provide local tax clearance certificates or local social insurance payment certificates for a required period shall be suspended in local administrative regions.

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On 26 February 2013, the General Office of the State Council issued the Notice on Continuity to Well Manage the Control Work of the Real Estate Market《關於繼續做好房 ( 產地市場調控工作的通知》), which stipulates the following:

(i) improving the mechanism of work responsibility of stability of the real estate price, measures including requiring the relevant departments under the State Council to strengthen the supervision and inspection of the stability of prices. The provincial people’s government shall conduct interviews if local governments in its jurisdiction fail to implement housing purchase restrictions;

(ii) continuing to suppress investment purchasers, measures including continuing to implement and improve the purchase restriction measures; using the effect of tax to adjust the real estate price, the tax bureau and housing construction departments shall closely coordinate and shall levy individual income tax at a tax rate of 20% according to the regulations;

(iii) increasing the land supply for residential commercial properties, measures including that the total land supply for residential land in 2013 in principle shall be no less than the average land supply in the past five years;

(iv) accelerating the planning and construction of affordable housing project, fully implementing the task of building 4.7 million units, constructing 6.3 million new sets of affordable housing projects in 2013;

(v) improving the market supervision and anticipation management;

(vi) strengthening the administration on the credibility of real estate development enterprises;

(vii) studying the establishment of shared credit management system among housing and urban construction, development and reform, land and natural resources, finance, taxation, industry and commerce, statistics and other departmental; and

(viii) timely recording and releasing the illegal behavior of the real estate enterprises.

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For enterprises setting up extraordinarily high prices for the pre-sales commodity properties and accepting no price guidance from the relevant urban housing construction authorities, or having not established pre-sales proceeds supervision mechanism for commodity properties projects, pre-sales permit shall not be issued. If real estate enterprises have idle land or conduct activities such as land speculation, keeping the properties off the market, driving up prices and other illegal acts, the relevant departments shall establish a linkage mechanism and intensify the relevant punishments. The Land and Resources Department shall prohibit the enterprise to participate in land bidding, the financial institutions shall not grant new loans for development projects, the securities regulatory authorities shall suspend the approval of its [REDACTED], refinancing or significant asset reorganisation and the banking supervision departments shall prohibit the enterprise from financing through trust scheme.

Pursuant to the “Notice of the People’s Government of Jilin Province on the Revitalization of the Real Estate Market to Promote the Residents of Housing Consumption《吉林省人民政府關於搞活房地產市場促進居民住房消費的通知》 ( )” issued on 2 November 1999, the government encourages the purchase and transfer of residential properties. Business tax shall be exempted if the residential property offered for sale on the market has been purchased and occupied for personal uses for more than one year. For the residential property that has been purchased and occupied for personal uses for less than a year, the business tax shall be imposed based on the difference between the original purchase price and the last sales price. If individuals purchase ordinary commodity house for personal use, the deed tax shall temporarily be imposed only half of the original. The transfer of individuals with ordinary residential house is temporarily exempted from imposing land value-added tax and land transfer fee. If the self-used ordinary house is administratively allocated, the buyers shall pay the land transfer premium or an equivalent at the price of no less than 10% of regulated price of the land where the housing locates. Individual income tax will be imposed on the total amount of the [REDACTED] for transfer of residential properties within a period of five years from the date of purchase. If an individual sells his/her ordinary standard apartment after five years of the purchase, business tax will normally be exempted.

(v) Licensing Requirements for Hotel Operations Security Control Regulations

According to the Measures for the Control of Security in the Hotel Industry《旅館業治安 ( 管理辦法》) (the “Hotel Security Control Measures”), promulgated by the Ministry of Public Security on 10 November 1987 and amended on 20 January 2006 and 8 January 2011, respectively, and the Decisions of the State Council to Implement Administrative Licenses on Items Necessarily to be Retained for Administrative Examination《國務院對確需保留的行 ( 政審批項目設定行政許可的決定》), promulgated by the State Council on 29 June 2004 and amended on 29 January 2009 and amended on 24 February 2015, respectively, an application to operate a hotel in the PRC must be examined and approved by a local public security authority and a special industry license must be obtained from the local public security authority prior to the operations of the hotel. The Hotel Security Control Measures further imposes certain security control obligations on the hotel operators, such as the obligation to examine the identification cards of customers, the obligation to keep customers’ deposited properties safe, and the obligation to report to the public security authorities of any criminal activities.

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Fire Control Regulations

According to the Provisions on the Administration of Fire Safety of State Departments, Organizations, Enterprises and Institutions《機關、團體、企業、事 ( 業單位消防安全管理規定》) (the “Fire Safety Provisions”), promulgated by the Ministry of Public Security on 14 November 2001, hotels are classified as one of the key administrative units for fire control purposes. On 1 May 2009, the Fire Prevention Law of the PRC《中華人民共和國消防法》 ( ) (the “Fire Prevention Law”), which was promulgated by the Standing Committee of National People’s Congress on 29 April 1998 and amended on 28 October 2008, came into effect. The Fire Prevention Law, together with the Fire Safety Provisions, require public gathering places, like hotels, to pass a fire prevention safety inspection conducted by the local public security fire-fighting department before the commencement of business operations.

Administration of Sanitation in Public Places

Pursuant to the Regulations on the Sanitary Administration of Public Places《公共 ( 場所衛生管理條例》) (the “Sanitary Administration Regulations”) promulgated by the State Council on 1 April 1987, hotels are listed as one of the public places which are under special sanitary supervision and administration. The Sanitary Administration Regulations further requires that hotels must obtain a public place sanitation permit from the Ministry of Health or its local counterparts for operation and the public place sanitation permit must be reviewed every two years. According to the Implementing Rules of Regulations on the Sanitary Administration of the Public Places《公共場所衛生管理條例實施細則》 ( ), which was promulgated by the Ministry of Health on 10 March 2011, the hotel staff must conduct a health check at least once a year and obtain a health certificate before they are given job assignments.

Administration of Food Sanitation

In accordance with the Food Safety Law of the PRC《中華人民共和國食品安全 ( 法》), which was promulgated on 28 February 2009 and became effective as at 1 June 2009, and the Regulation on the Implementation of the Food Safety Law of the People’s Republic of China《中華人民共和國食品安全法實施條例》 ( ), which was promulgated and became effective as at 20 July 2009, hotels engaged in food and beverage operations must obtain a food catering service permit《餐飲服務許可證》 ( ). According to the Measures for the Administration of Permits for Operating Food and Beverage Services《餐飲服務許可管理辦法》 ( ), which was promulgated by the Ministry of Health on 4 March 2010 and became effective as at 1 May 2010, any food sanitation licenses《食品衛生許可證》 ( ) obtained prior to 1 May 2010 will be replaced by the food catering service permit once the food sanitation license expires. Hotels must be in compliance with the relevant sanitary standards and requirements relating to food sourcing and storage, food processing, restaurant services as well as take-away services.

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Environmental Protection

According to the Promotion of Cleaner Production Law of the PRC《中華 ( 人民共和國清潔生產促進法》), which was promulgated on 29 June 2002 and amended on 29 February 2012, hotels shall use technologies and equipment that conserve energy, water and serve other environmental protection purposes, and refrain from or reduce using consumer goods which may lead to the waste of resources and pollution of the environment.

On 22 January 2015, Ministry of Housing and Urban-rural Development issued the Measures for the Administration of Licenses for Urban Sewage Discharge into Drainage Networks《城鎮污水排入排水管網許可管理辦法》 ( ). According to such measures, any drainage entity, including entities who drain sewage into the urban drainage facilities due to engaging in lodging, catering and entertainment business, shall apply for a drainage license《排水許可證》 ( ) to drain sewage into the urban drainage facilities from local drainage administrative authorities.

(w) Property Management Enterprises

Enterprises that engage in property management shall establish a qualification management system pursuant to relevant provisions under the Property Management Regulations《物業管理條例》 ( ) (implemented on 1 September 2003 and revised on 26 August 2007). Pursuant to relevant provisions under the Measures on Property Service Enterprises Qualification Management《物業服務企業資質管理辦法》 ( ) which was implemented on 1 May 2004 and revised on 26 November 2007, a newly-established property service enterprise shall apply for the qualification by submitting the relevant documents to competent property departments of the people’s government of the municipalities directly under the central government and cities with special development zones where its business has been registered within 30 days after the receipt of its business license. Qualification examination and legal authority shall approve and issue the qualification certificate of corresponding levels based on the actual conditions of enterprises.

Pursuant to the Measures on Property Service Enterprises Qualification Management《物業服務企業資質管理辦法》 ( ), qualification of property service enterprises shall be classified into Level I, Level II and Level III in accordance with their registered capital, the professional personnel they employ, the scale and types of the property service they provide, and their performance and operating results, etc. Newly established property service enterprises shall be classified into the lowest level with a term of validity of one year. In accordance with the Reply on Relevant Issues Concerning Performing the Measures on Property Service Enterprises Qualification Management《關於執行 ( 〈物業管理企業資質管理辦法〉有關問題的覆函》), in the event that the newly established property service enterprises fail to provide property service within one year, such qualification shall become invalid. Otherwise, the property service enterprises may apply for assessment for higher level qualifications.

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The construction department of the State Council is responsible for the issue and management of Level I qualification certificates. Construction departments under the people’s government of provinces and autonomous regions are responsible for the issue and management of Level II qualification certificates. Real estate construction departments under the people’s government of municipalities directly under the central government are responsible for the issuance and management of Level II and Level III qualification certificates, which are subject to the guidance and supervision of the construction departments of the State Council. Real estate construction departments of the cities with special development zones are responsible for the issue and management of Level III qualification certificates, which are subject to the guidance and supervision of the construction departments of the State Council.

Property service enterprises with Level I qualification are allowed to undertake different kinds of property management projects. Property service enterprises with Level II qualification are allowed to undertake residential and non-residential property management projects of not more than 300,000 sq.m and 80,000 sq.m respectively. Property service enterprises with Level III qualification are allowed to undertake residential and non-residential property management projects of not more than 200,000 sq.m and 50,000 sq.m respectively.

Pursuant to the Catalogues of Industries for Guiding Foreign Investment (Amended in 2015)《外商投資產業指導目錄》 ( (2015修訂)), property management services fall into the categories which foreign investment is permitted.

In accordance with the relevant regulations of Property Rights Law of the PRC (《中華人民共和國物權法》) and Property Management Regulations《物業管理條例》 ( ), selection and engagement of property service enterprises require the consent of not less than half of the total number of owners and the gross floor area in the exclusive possession of such owners shall not be less than half of the total gross floor area of the property. In the event that the property service enterprise has been selected by the construction department prior to the engagement of property service enterprise by the owners at the meeting of owners, a preliminary property management contract shall be signed.

(x) Foreign Exchange Controls

The lawful currency of the PRC is the RMB, which is currently not freely convertible into foreign exchange. State Administration of Foreign Exchange (國家外匯管理局) (the “SAFE”), under the authority of the PBOC, is empowered with the functions of administering all matters relating to foreign exchange, including the enforcement of foreign exchange control regulations.

On 1 January 1994, the former dual exchange rate system for RMB was abolished and replaced by a controlled floating exchange rate system, which is determined by demand and supply of RMB. Pursuant to such systems, the PBOC sets and publishes the daily RMB-U.S. Dollar exchange rate. Such exchange rate is determined with reference to the transaction price for RMB-U.S. Dollar in the inter-bank foreign exchange market on the previous day. Also, the PBOC, with reference to exchange rates in the international foreign exchange market, announces the exchange rates of RMB against other major foreign

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On 29 January 1996, the State Council promulgated Regulations for the Control of Foreign Exchange《外匯管理條例》 ( )(“Control of Foreign Exchange Regulations”) which became effective from 1 April 1996. The Control of Foreign Exchange Regulations classifies all international payments and transfers into current account-items and capital account-items. Current account items are no longer subject to SAFE approval while capital account items still are. The Control of Foreign Exchange Regulations was subsequently amended on 14 January 1997 and 5 August 2008, respectively. Such amendments affirmed that the state shall not restrict international current account payments and transfers.

On 20 June 1996, PBOC promulgated the Regulations for Administration of Settlement, Sale and Payment of Foreign Exchange《結匯、售匯及付匯管理規定》 ( ) (the “Settlement Regulations”) which became effective on 1 July 1996. The Settlement Regulations abolished the remaining restrictions on convertibility of foreign exchange in respect of current account items while retaining the existing restrictions on foreign exchange transactions in respect of capital account items. On the basis of the Settlement Regulations, the PBOC published the Provisions on the Administration of Foreign Exchange Accounts《境內外匯賬戶管理規定》 ( ) on 7 October 1997, which permits foreign-invested enterprises to open, on the basis of their needs, foreign exchange settlement accounts for current account receipts and payments of foreign exchange, and specialised accounts for capital account receipts and payments at designated foreign exchange banks.

On 25 October 1998, the PBOC and SAFE promulgated the Notice Concerning the Discontinuance of Foreign Exchange Swapping Business《關於停辦外匯調劑業務的通 ( 知》) pursuant to which and with effect from 1 December 1998, all foreign exchange business in the PRC for foreign-invested enterprises shall be discontinued, while the trading of foreign exchange by foreign-invested enterprises shall be regulated under the system for the settlement and sale of foreign exchange applicable to banks. On 21 July 2005, the PBOC announced that, starting from 21 July 2005, the PRC will implement a regulated and managed floating exchange rate system based on market supply and demand and by reference to a basket of currencies. The RMB exchange rate is no longer pegged to the U.S. Dollar. The PBOC will announce the closing price of a foreign currency such as the U.S. Dollar traded against the RMB in the inter-bank foreign exchange market after the closing of the market on each business day, setting the central parity for trading of the RMB on the following business day.

Save for foreign-invested enterprises or other enterprises which are specially exempted by relevant regulations, all entities in the PRC (except for foreign trading companies and production enterprises having import and export rights, which are entitled to retain part of foreign exchange income generated from their current account transactions and to make payments using such retained foreign exchanges in their current account transactions or approved capital account transactions) once were required to sell their foreign exchange income to designated foreign exchange banks. Foreign exchange income from loans issued by organisations outside the territory or from the issuance of

– II-43 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW bonds and shares is not required to be sold to designated banks, but may be deposited in foreign exchange accounts with designated banks. Pursuant to the Circular of the State Administration of Foreign Exchange on Retaining Foreign Exchange Income under Current Account by Domestic Entities《關於境內機構自行保留經常項目外匯收入的通知》 ( ) issued by SAFE on 12 August 2007, domestic entities can retain foreign exchange income under current account in light of its operation needs.

Enterprises in the PRC (including foreign-invested enterprises) which require foreign exchange for transactions relating to current account items, may, without the approval of SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks, upon presentation of valid receipts and proof. Foreign-invested enterprises which need foreign currencies for the distribution of profits to their shareholders, and Chinese enterprises which, in accordance with regulations, are required to pay dividends to shareholders in foreign currencies, may with the approval of board resolutions on the distribution of profits, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks.

On 13 February 2015, the SAFE promulgated the Notice on Further Streamlining and Improving the Foreign Exchange Administration of Direct Investment《關於進一步簡化和 ( 改進直接投資外匯管理政策的通知》), which became effective on 1 June 2015. The Notice cancelled the review of the foreign exchange registration in direct investment projects by the branches of SAFE and foreign-invested enterprises could directly apply to banks for foreign exchange registration. The Notice also cancelled the registration procedures for the confirmation of acquisition by foreign investors of shares, and the annual inspection of foreign exchange of direct investments.

Convertibility of foreign exchange in respect of capital account items, like direct investment and capital contribution, is still subject to restriction, and prior approval from SAFE or its competent branch is required.

(y) Civil air defense property

According to the Civil Air Defense Law of the People’s Republic of China《中華人民 ( 共和國人民防空法》) promulgated on 29 October 1996 and revised on 27 August 2009, civil air defense works include underground protective structures that are constructed particularly for sheltering people and goods and materials, civil air defense command and medical aid in time of war, and basements that are constructed in combination with the surface buildings and that can be used for air defense in time of war. The competent departments for civil air defense shall be responsible for organizing construction of such works as civil air defense commands, shelters for public use and main passages for evacuation. Other relevant departments shall be responsible for organizing construction of special works for medical aid and for storage of goods and materials.

The design, construction and quality of civil air defense works must conform to the protection and quality standards established by the State. The final design and manufacture of special equipment for civil air defense works must conform to the standards established by the State. The relevant units shall be responsible for constructing works for sheltering their own employees, goods and materials. No organizations or

– II-44 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX II REGULATORY OVERVIEW individuals may without approval dismantle any civil air defense works. Where it is truly necessary to dismantle such works, the matter must be reported to the competent department for civil air defense for approval, and the unit that dismantles the works shall be responsible for reconstruction or compensation.

A party that commits any of the following acts shall be given a disciplinary warning by the competent department for civil air defense of the people’s government at or above the county level and be ordered to set it right within a time limit, and in the case of an individual a fine of not more than RMB5,000 may also be imposed on him and in the case of a unit a fine ranging from RMB10,000 to RMB50,000 may also be imposed on it; the party shall be liable for the losses according to law, if any:

(i) occupying civil air defense works;

(ii) failing to construct civil air defense works in conformity with the protection standards and quality standards established by the State;

(iii) altering, in violation of the relevant regulations of the State, the major structure of civil air defense works, dismantling equipment or facilities for such works or endangering the safety or impairing the functions of the works by any other means;

(iv) refusing to reconstruct the civil air defense works that were dismantled;

(v) using the special frequency for civil air defense communications or the same acoustic signals as those used for air defense warning or dismantling, without approval, equipment or facilities for civil air defense communications and warning;

(vi) obstructing the installation of facilities of civil air defense communications and warning and refusing to stop doing so; or

(vii) discharging waste water or gas or dumping waste material into civil air defense works.

(z) Construction safety

Pursuant to Regulations on the Administration of Work Safety of Construction Projects《建設工程安全生產管理條例》 ( ) promulgated on 24 November 2003, the development units shall provide the construction areas with the materials of underground pipelines for water supply, drainage, electricity supply, gas supply, heat supply, telecommunications and radio and television within the construction sites and adjacent areas, the meteorological materials and hydrologic observation materials, and materials relating to the adjacent buildings and structures and underground engineering, and shall ensure the authenticity, accuracy and completeness of such materials.

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The development units, survey units, design units, construction units, supervision units and other units relating to the work safety of construction projects must comply with the provisions of the laws and regulations on work safety, guarantee the work safety of construction projects and legally assume the responsibilities for the work safety of construction projects.

When the development units apply for the collection of construction license, they shall provide materials relating to the work safety measures of the construction projects. For construction projects with legal approval of the Report of Work Commencement, the development units shall, within 15 days upon the date of approval of the Report of Work Commencement, submit the measures ensuring the work safety to the competent construction administrations or other relevant departments of the local people’s governments at the county level or above at the locality of the construction projects for filing.

When the competent construction administrations examine and issue construction licenses, they shall examine whether the construction projects have work safety measures, and if there are no work safety measures, they may not issue the construction licenses.

(aa) Major taxes applicable to property developers

Enterprise Income tax

According to the Income Tax Law of The People’s Republic of China《中華人 ( 民共和國企業所得稅法》) (the New Income Tax Law) enacted by the National People’s Congress on 16 March 2007 and the Rules on the Implementation of Enterprise Income Tax Law of PRC《中華人民共和國企業所得稅法實施條例》 ( ) (the Rules on the Implementation) enacted by the State Council on 6 December 2007 and the aforesaid law and regulation enforced from 1 January 2008 onwards, a uniform income tax rate of 25% will be applied towards foreign investment enterprise and foreign enterprises which have set up production and operation facilities in the PRC as well as PRC enterprises. Under the New Tax Law and the Rules on the Implementation, enterprises established under the laws of or within the territory of the PRC, or established under the laws of a foreign country (region), but whose “de facto management body” is located in the PRC are treated as resident enterprises for PRC tax purposes. If an entity is treated as a resident enterprise for PRC tax purposes, it will be subject to PRC tax on its worldwide income at the 25% uniform tax rate, which will include any dividend income the entity receives from its subsidiaries, unless otherwise provided therein. Although the New Income Tax Law provides that dividend income between qualified resident enterprises is exempted income, it is not clear what is considered as a qualified resident enterprise under the New Income Tax Law. Furthermore, the New Income Tax Law and the Rules on the Implementation, effective 1 January 2008, provide that withholding tax at a rate of 10% will normally apply to dividends payable to non-PRC investors which are derived from sources within the PRC. Moreover, any gain realized on the transfer of shares by investors will be subject to 10% tax if such gain is regarded as income derived from sources within the PRC. Moreover, according to the Arrangements in respect of Prevention of Double Taxation and Tax Evasion between Hong Kong and

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PRC《內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排》 ( ), the PRC tax resident enterprise who distributes dividends to its Hong Kong shareholders should be levied enterprise income tax according to PRC laws, however, if the beneficiary of the dividends is a Hong Kong tax resident, who directly hold not less than 25% equity of the aforesaid enterprise (i.e. the dividends distributor), the tax levied should be 5% of the distributed dividends. If the beneficiary of the dividends is a Hong Kong tax resident, who directly hold less than 25% equity of the aforesaid enterprise, the tax levied should be 10% of the distributed dividends.

On 11 April 2008, the State Administration of Taxation issued the Notice of the Prepayment of Enterprise Income Tax of the Real Estate Development Enterprises (《國家稅務總局關於房地產企業開發所得稅預繳問題的通知》), requiring real estate developers to prepay enterprise income tax by quarter (or month) according to the current actual profit.

According to the Notice, for the incomes generated from the pre-sale before completion of the construction of buildings for residential or commercial use or other kinds, the tax prepayments thereof shall be paid upon calculation of the estimated quarterly or monthly profit according to the preset estimated profit rate, which shall be readjusted according to the actual profit after the completion of the construction of the buildings and settlement of the taxable cost.

With respect to non-low-price economy residence, the preset estimated profit rate for the buildings located at provincial-level cities and suburbs shall be not less than 20%, while that for prefectural-level cities and suburbs shall be not less than 15%; for the low-price economy residence, the preset estimated profit rate shall be not less than 3%.

Business Tax

Pursuant to the Interim Regulations of the People’s Republic of China on Business Tax《中華人民共和國營業稅暫行條例》 ( ) enacted by the State Council on 13 December 1993 and enforced on 1 January 1994 and which was later amended in November 2008 and became enforceable on 1 January 2009 and its Detailed Implementation Rules on the Provisional Regulations of The People’s Republic of China on Business Tax《中華人民共和國營業稅暫行條例實施細則》 ( ) issued by the Ministry of Finance on 25 December 1993, which was later amended in 2011, the tax rate on the transfer of immovable properties, their superstructures and attachments is 5%.

Land Value-added Tax

According to the requirements of the Provisional Regulations of The People’s Republic of China on Land Value-added Tax (the Land Value-added Tax Provisional Regulations)《中華人民共和國土地增值稅暫行條例》 ( ) which was enacted on 13 December 1993 and revised on 8 January 2011, and the Detailed Implementation Rules on the Provisional Regulations of The People’s Republic of China on Land Value-added Tax《中華人民共和國土地增值稅暫行條例實施細則》 ( ) (the Land

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Value-added Tax Detailed Implementation Rules) which was enacted and enforced on 27 January 1995, any appreciation amount gained from taxpayer’s transfer of property shall be subject to land value-added tax. Land value-added tax shall be subject to a regime of four level progressive rates: 30% on the appreciation amount not exceeding 50% of the sum of deductible items; 40% on the appreciation amount exceeding 50% but not exceeding 100% of the sum of deductible items; 50% on the appreciation amount exceeding 100% but not exceeding 200% of the sum of deductible items; and 60% on the appreciation amount exceeding 200% of the sum of deductible items. The related deductible items aforesaid include the following:

(i) amount paid for obtaining the Grant of State-owned Land Use Right;

(ii) costs and expenses for development of land;

(iii) costs and expenses of new buildings and ancillary facilities, or estimated prices of old;

(iv) buildings and constructions;

(v) related tax payable for transfer of property;

(vi) other deductible items as specified by MOFCOM.

After the issuance of the Land Value-added Tax Provisional Regulations and the Land Value-added Tax Detailed Implementation Rules, due to the relatively long period required for property development and transfer, many districts, while they were implementing the regulations and rules, did not mandatorily require the property development enterprises to declare and pay the Land Value-added Tax. Therefore, in order to assist the local tax authorities in the collection of Land Value-added Tax, the MOFCOM, State Administration of Taxation, the Ministry of Construction and the Ministry of Land and Resource had separately and jointly issued several notices to restate the following: After the transfer contact is signed, the taxpayers should declare the tax to the local tax authorities where the properties are located, and pay the Land Value-added Tax in accordance with the amount as calculated by the tax authority and within the specified time limit. For those who fail to acquire proof of tax payment or tax exemption from the tax authorities, the property administration authority shall not process the relevant title change procedures, and shall not issue the Realty Title Certificate.

The State Administration of Taxation also issued the Notice issued by State Administration of Taxation in respect of the Serious Handling of Administration Work in relation to the Collection of Land Value-added Tax《關於認真做好土地增值 ( 稅徵收管理工作的通知》) on 10 July 2002 to request local tax authorities to modify the management system of Land Value-added Tax collection and operation procedures, to build up a proper tax return system for Land Value-added Tax and to improve the methods of pre-levying for the pre-sale of properties. That notice also pointed out that the preferential policy of Land Value-added Tax exemption has expired and that such tax shall be levied again for first time transfer of properties under property

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development contracts signed before 1 January 1994 or project proposals that have been approved and capital was injected for development. State Administration of Taxation issued the Notice of State Administration of Taxation in respect of the Strengthening of Administration Work in relation to the Collection of Land Value-added Tax on 2 August 2004 and the Notice of State Administration of Taxation in respect of the Further Strengthening of Administration Work in relation to the Collection of Land Value-added Tax and Land Use Tax in Cities and Towns《國家 ( 稅務總局關於進一步加強城鎮土地使用稅和土地增值稅徵收管理工作的通知》)on5 August 2004. The aforesaid notices demonstrate that the administration work in relation to the collection of land value-added tax should be further strengthened. The preferential policy of Land Value-added Tax exemption for first time transfer of properties under property development contracts signed before 1 January 1994 is expired and such tax shall be levied again. Where such taxes were still not levied, the situation should be corrected immediately. Also, the notice required that the system of tax declaration and tax sources registration in relation to the land value-added tax should be further improved and perfected.

On 2 March 2006, the MOFCOM and State Administration of Taxation issued the Notice of Certain Issues Regarding Land Value-added Tax《關於土地增值稅若干 ( 問題的通知》). Our directors consider that this notice has no material impact on the Group’s business and operations. The notice clarifies the relevant issues regarding land value-added tax as follows:

(i) As to the Tax Collection and Exemption in the Sale of Ordinary Standard Residential Properties Built by Taxpayer

The notice sets out the recognised standards for ordinary standard residential properties. Where any developers build ordinary standard residential properties as well as other commercial properties, the value of land appreciation shall be assessed separately. In respect of ordinary standard residential properties for which application for tax exemption has been filed with the tax authority at the locality of the property before the notice is issued and for which land value-added tax exemption has been granted by the tax authority on the basis of the standards of ordinary residential properties originally set down by the people’s government of the province, autonomous region or municipality directly under the Central Government, no adjustment shall be retroactively made.

(ii) As to the Advance Collection of Land Value-added Tax as well as the Settlement

All regions shall further improve the measures for the advance collection of land value-added tax, and decide the advance collection rate in a scientific and reasonable manner, and adjust it at a proper time according to the level of value appreciation in the property industry and market conditions within the region and on the basis of the specific property categories, namely, ordinary standard residential properties, non-ordinary standard residential properties and commercial properties. After a project is completed, the

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relevant settlement shall be handled in a timely manner, with any overpayment refunded or any underpayment being made up;

If any tax pre-payment is not paid within the advance collection period, overdue fines shall be imposed additionally as at the day following the expiration of the prescribed advance collection period, according to the relevant provisions of the Tax Collection and Administration Law and its detailed rules for implementation;

As to any property project that has been completed and gone through the acceptance procedure, where the floor area of the property as transferred makes up 85% or more in the salable floor area, the tax authority may require the relevant taxpayer to conduct the settlement of land value-added tax on the transferred property according to the matching principles regarding the proportion between the income as generated from the transfer of property and the amount under the item of deduction. The specific method of settlement shall be prescribed by the local tax authority of a province, autonomous region, municipality directly under the Central Government, or a city under separate state planning;

On 28 December 2006, the State Administration of Taxation issued the Notice on the Administration of the Settlement of Land Value-added Tax of Property Development Enterprises《國家稅務總局關於房地產開發企業土地增 ( 值稅清算管理有關問題的通知》) which came into effect on 1 February 2007. The notice set out further provisions concerning the settlement of land value-added tax by property developers by clarifying details regarding units responsible for settlement of land value-added tax, requirements, materials to be submitted, auditing and verification, recognition of revenue of indirect sale and self-use properties, deductible items and handling of transfer after tax is imposed and settled etc. Local provincial tax authorities can formulate their own implementation rules according to the notice and local situation. The notice sets out the following key requirements:

(i) Settlement of land value-added tax on a project by project basis

The settlement of land value-added tax shall be made for each approved real estate development project; as for a project developed by stages, the settlement shall be made for each stage of the project.

In case a development project comprises both ordinary residence and non-ordinary residence, the added value shall be calculated separately.

(ii) Settlement requirements for land value-added tax

Where it is under any of the following circumstances, the taxpayer shall settle its land value-added tax: a real estate project is completed and sold out; a real estate project that has not been completed but it is transferred as a whole; the Grant of State-owned Land Use Right is transferred.

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A taxpayer that satisfies the above said provisions shall handle the formalities for settlement at the competent tax authority within 90 days as at the date when it meets the settlement requirements.

In case of any of the following circumstances, the tax authority may require the taxpayer to settle its land value-added tax:

As for a real estate project completed and accepted, the construction area already transferred makes up to 85% or more of the salable construction area of the whole project; or although this proportion is below 85%, the residuary salable construction area has been leased or used for self-purposes;

The sale is not completed upon the expiration of three years since the day when the sale (pre-sale) permit is obtained;

The taxpayer has filed an application for writing-off tax registration but has not handled the formalities for settling the land value-added tax yet;

Other circumstances as prescribed by the provincial tax authorities. A taxpayer that satisfies the abovementioned provisions shall handle the formalities for settlement within the time limit prescribed by the competent tax authority.

(iii) Collection of land value-added tax by verification

Where a real estate development enterprise is under any of the following circumstances, the tax authority may, by consulting the tax burdens of the local enterprises similar to it in terms of development scale and income level, collect land value-added tax against it by verification on the basis of the levying rate that is not lower than the advance levying rate:

i. it fails to set up accounting books in accordance with the provisions of laws and regulations;

ii. it destroys the accounting books without authorization or refuses to provide the data of tax payments;

iii. it has established accounting books, but the accounting items are confusing, or its information on costs, revenue vouchers, and expense vouchers are mutilated and incomplete and it is difficult to determine the transfer or amount under the deductible items;

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iv. it meets the settlement conditions of land value-added tax, but it fails to go through the settlement formalities within the prescribed time limit, or it is ordered by the tax authority to conduct settlement within a certain time limit but still fails to do so upon the expiration of the time limit; or

v. the taxable basis declared is obviously much lower, and without reasonable ground.

On 12 May 2009, the State Administration of Taxation issued the Notice on Administration and Procedure of the Settlement of Land Value-added Tax《國家稅 ( 務總局關於印發〈土地增值稅清算管理規程〉的通知》), the content of which is consistent with the notice issued on 28 December 2008, with respect to the settlement of land value-added tax on a project-by-project basis, settlement requirement for land value-added tax and collection of land value-added tax by verification.

Deed tax

Pursuant to the Interim regulations of the People’s Republic of China on Deed Tax《中華人民共和國契稅暫行條例》 ( ) enacted by the State Council on 7 July 1997 and enforced on 1 October 1997, the transferee, whether an entity or individual, of the title to a land site or building in the PRC shall have to pay deed tax. The rate of deed tax is 3%–5%. The governments of provinces, autonomous regions and municipalities directly under the central government may, within the aforesaid range, determine and report their effective tax rates to the MOFCOM and the State Administration of Taxation for the record.

On 22 October 2008, the Ministry of Finance and State Administration of Taxation issued the Notice on the Adjustments to Taxation on Real Estate Transactions《財政部、國家稅務總局關於調整房地產交易環節稅收政策的通知》 ( ). According to the Notice, the following policies would be implemented in order to encourage first-time purchases of ordinary residential properties:

(i) temporarily cease to levy the stamp duty on residential properties sold or purchased by individuals; and

(ii) temporarily cease to levy the land value-added tax on the residential properties sold by individuals.

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Urban land use tax

Pursuant to the Provisional Regulations of the People’s Republic of China Governing Land Use Tax in Cities and Towns《中華人民共和國城鎮土地使用稅暫行 ( 條例》) enacted by the State Council on 27 September 1988 and revised in 2013, the land use tax in respect of urban land is levied according to the area of relevant land. The annual amounts of land use tax per square meter are as follows:

(i) CNY1.5 to CNY30 for large cities;

(ii) CNY 1.2 to CNY24 for medium sized cities;

(iii) CNY 0.9 to CNY18 for small cities;

(iv) CNY 0.6 to CNY12 for cities under the county level, towns, and industrial and mining zones.

According to the provisional regulations, land use tax shall be collected from foreign invested enterprises, foreign enterprises and foreign individuals.

On 11 June 2007, SAT issued the Notice on Cancelling Certain Administrative Examination and Approval Items for Local Taxes《關於取消部分地方稅行政審批專 ( 案的通知》), which came into force as at the date of its issuance. Under this notice, certain preferential treatments of land use tax have been canceled as follows:

(i) for certain infrastructure construction projects, in particular the large-scale infrastructure construction projects supported by relevant national industry policies, which need large areas of land and long-term construction but without operational revenue during the construction period, the exemption or reduction of land use tax may be granted by the taxation bureau at the provincial level based on the specified situations.

(ii) for the real estate development enterprises that have difficulty in paying the land use tax prior to the sale of commercial real estates, the exemption or reduction of land use tax may be granted by the taxation bureau at the provincial level based on the specified situations.

(iii) the exemption or reduction of land use tax as a benefit for using land for port construction, electric power industry and coal industry.

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Buildings tax

Under the Interim Regulations of the People’s Republic of China on Buildings Tax《中華人民共和國房產稅暫行條例》 ( ) enacted by the State Council on 15 September 1986 and revised in 2011, buildings tax shall be 1.2% if it is calculated on the basis of the residual value of a building, and 12% if it is calculated on the basis of the rental. The following categories of buildings shall be exempt from buildings tax:

(i) a building of governmental agencies, people’s organizations and the armed forces for their own use;

(ii) a building of institutions whose operating expenses are allocated by State finance departments for their own use;

(iii) a building religious temples and shrines’ parks and places of historic interest and scenic beauty for their own use;

(iv) a building owned by individuals for non-business purposes; and

(v) tax exemption approved by the Ministry of Finance for other buildings.

On 31 December 2008, the State Council decided to abolish the urban real estate tax《城市房地產稅》 ( ) applicable to foreign-funded enterprises, foreign individual and entities and since 1 January 2009, the urban real estate tax has been substituted by the real estate tax《房產稅》 ( ), which as a result has been applicable to both local and foreign entities and individuals.

Stamp duty

Under the Interim regulations of the People’s Republic of China on Stamp Duty《中華人民共和國印花稅暫行條例》 ( ) enacted by the State Council on 6 August 1988 and revised in 2011, for property rights transfer instruments, including those in respect of property ownership transfer, the rate of stamp duty shall be 0.05% of the amount stated therein; for permits and certificates relating to rights, including Realty Title Certificates and land use rights certificates, stamp duty shall be levied on an item basis of RMB5 per item.

Municipal maintenance tax

Under the Interim Regulations of the People’s Republic of China on Municipal Maintenance Tax《中華人民共和國城市維護建設稅暫行條例》 ( ) enacted by the State Council on 8 February 1985 and revised in 2011, any taxpayer, whether an entity or individual, of consumption tax, value-added tax or business tax shall be required to pay municipal maintenance tax. The tax rate shall be 7% for a taxpayer whose domicile is in an urban area, 5% for a taxpayer whose domicile is in a county and a town, and 1% for a taxpayer whose domicile is not in any urban area or county or town.

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(bb) Labour protection

The Employment Contract Law of the PRC《中華人民共和國勞動合同法》 ( )was promulgated on 29 June 2007 and revised in 2012 and Implementing Regulations of the PRC Employment Contract Law《中華人民共和國勞動合同法實施條例》 ( ) was promulgated and became effective on 3 September 2008. This law and its implementing regulations govern the establishment of employment relationships between employers and employees, and the conclusion, performance, termination of, and the amendment to, employment contracts. To establish an employment relationship, a written employment contract shall be signed. In the event that no written employment contract was signed at the time of establishment of an employment relationship, a written employment contract shall be signed within one month after the date on which the employer first engages the employee.

Under applicable PRC laws, rules and regulations, including the Social Insurance Law《中華人民共和國社會保險法》 ( ), promulgated on October 2010, which took effective on 1 July 2011, the Interim Regulation on the Collection and Payment of Social Security Fund《社會保險費征繳暫行條例》 ( ) promulgated by the State Council and which became effective on 22 January 1999, the Interim Measures concerning the Maternity Insurance《企業 ( 職工生育保險試行辦法》) promulgated by the Ministry of Labour on 14 December, 1994 and which became effective on 1 January 1995, the Regulations on Occupational Injury Insurance《工傷保險條例》 ( ) promulgated on 27 April 2003 and which became effective on 1 January 2004 and were amended on 20 December 2010, and the Regulations on the Administration of Housing Accumulation Funds《住房公積金管理條例》 ( ) promulgated by the State Council and which became effective on 3 April 1999 and were amended on 24 March 2002, employers are required to contribute, on behalf of their employees, to a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, maternity leave insurance, and to housing accumulation funds. These payments are made to local administrative authorities and any employer that fails to contribute may be fined and ordered to make good the deficit within a stipulated time limit.

– II-55 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The following is the text of a report received from Mazars CPA Limited, Certified Public Accountants, Hong Kong, the Target Company’s reporting accountants, on the financial information of the Target Group, for the purpose of incorporation in this circular. M

To the Board of Directors Ground Properties Company Limited

[Date]

Dear Sirs,

We set out below our report on the financial information of Ka Yun Investments Limited (the “Target”) and its subsidiaries (the “Target Group”), comprising the consolidated statements of financial position of the Target Group as at 31 December 2012, 2013, 2014 and 31 August 2015, the statements of financial position of the Target as at 31 December 2014 and 31 August 2015, and the consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of changes in equity of the Target Group for the years ended 31 December 2012, 2013 and 2014 and the eight months ended 31 August 2015 (the “Relevant Periods”), together with the notes thereto (the “Financial Information”), and the consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity, together with the notes thereto, of the Target Group for the eight months ended 31 August 2014 (the “Corresponding Financial Information”) for inclusion in a circular issued by Ground Properties Company Limited (“Ground Properties”) dated [Date] (the “Circular”) in connection with the very substantial acquisition in respect of the proposed acquisition of the entire registered capital of the Target (the “Proposed Acquisition”).

The Target directly or indirectly holds the entire equity interest in Xin Rui Investments Limited (“Xin Rui”), Jilin Province Xinrui Enterprise Management Consultation Co., Ltd. (“Jilin Xinrui”), 吉林省融利投資有限公司 (Jilin Rongli Investment Company Limited#) (“Jilin Rongli”) and 吉林省融裕投資有限公司 (Jilin Rongyu Investment Company Limited#) (“Jilin Rongyu”) (together with the Target collectively referred to as the “New Holding Companies”), prior to the acquisition of the entire equity interest in Ground Real Estate Group Company Limited (“Ground Real Estate”) and its subsidiaries (collectively referred to as “Ground Real Estate Group”) (the “Ground Real Estate Acquisition”) on 14 May 2015.

Ground Real Estate is a limited liability company established in the People’s Republic of China (the “PRC”) on 26 November 2010, the entire equity interests of which were held by a group of companies that were ultimately owned by Mr. Cui Mindong (“Mr. Cui”) and Ms. Chai Xiu (“Ms. Chai”) (the parents of Ms. Cui Xintong (“Ms. Cui”)). The principal activities of Ground Real Estate Group are property development, property investment and property management and related services.

– IIIA-1 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

On 25 February 2014, Ground Real Estate entered into an equity transfer agreement with 廣澤投資控股集團有限公司 (Ground Investment Holding (Group) Limited#) (“Ground Investment Holding”), pursuant to which Ground Real Estate agreed to acquire 65% of the entity interest in 吉林省廣澤旅遊開發有限公司 (Jilin Ground Tourism Investment Co., Ltd.#) (“Jilin Ground Tourism Investment”) at a consideration of RMB6,500,000 from Ground Investment Holding (“Fusong Acquisition”). The remaining 35% equity interest of Jilin Ground Tourism Investment was held by Goodyear International Capital Limited, which is a wholly-owned subsidiary of Ground Properties.

Pursuant to the gift and confirmatory deed dated 10 December 2014, a group of companies (including Ground Investment Holding) that were ultimately and beneficially owned by Mr. Cui and Ms. Chai transferred their 100% equity interest in Ground Real Estate and 65% equity interest in Jilin Ground Tourism Investment to Ms. Cui by way of a gift and nominee arrangement with effect from 1 January 2014. Since that date, Ms. Cui became the controlling party of Ground Real Estate and Jilin Ground Tourism Investment.

For the preparation of the Financial Information of the Target, the Fusong Acquisition constitutes a common control combination as Ground Real Estate and Jilin Ground Tourism Investment are under common control of Ms. Cui before and after the Fusong Acquisition. This common control combination has been accounted for using merger accounting with reference to the Accounting Guideline 5 “Merger Accounting For Common Control Combinations” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The results and the assets and liabilities of Jilin Ground Tourism Investment and its subsidiaries are included in the Financial Information of The Target effective from 1 January 2014 which is the date when the common control was established.

On 14 May 2015, Jilin Rongli and Jilin Rongyu entered into a share transfer agreement each with Ground Investment Holding, 吉林省東秀投資有限公司 (Jilin Dongxiu Investment Company Limited#) (“Jilin Dongxiu”) and 長春東秀投資有限公司 (Changchun Dongxiu Investment Company Limited#) (“Changchun Dongxiu”) to transfer their respective equity interest in Ground Real Estate to Jilin Rongli and Jilin Rongyu.

The Ground Real Estate Acquisition in substance involved the insertion of the New Holding Companies on top of Ground Real Estate Group for the purpose of the proposed acquisition of the Target Group by Ground Properties Company Limited. None of the New Holding Companies carried out any business as at the date of the Ground Real Estate Acquisition. The insertion of the New Holding Companies on top of Ground Real Estate Group during the Relevant Periods has not resulted in any change of economic substance. Accordingly, the Financial Information is presented as a continuation of Ground Real Estate Group.

Immediately after the Ground Real Estate Acquisition on 14 May 2015, the Target became the holding company of Ground Real Estate Group.

– IIIA-2 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

All subsidiaries of the Target have adopted 31 December as their financial year end date for financial reporting purpose. As at the date of this report, no statutory audited financial statements of the Target and of each of its subsidiaries have been prepared for each of the years ended 31 December 2012, 2013 and 2014.

For the purpose of this report, the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Target Group for the Relevant Periods include the results and cash flows of all companies now comprising the Target Group, as if the Target had been the holding company of Ground Real Estate Group throughout the Relevant Periods. The consolidated statements of financial position of the Target Group as at 31 December 2012, 2013, 2014 and 31 August 2015 (the “Underlying Financial Statements”) have been prepared to present the state of affairs of the Target Group as if the Target had been the holding company of Ground Real Estate Group at these dates.

The Financial Information has been prepared by the directors of the Target for inclusion in the Circular issued in connection with the Proposed Acquisition based on the Underlying Financial Statements, with no adjustments made thereon and in accordance with the basis as set out in Section B below and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

The directors of the Target are responsible for the preparation and true and fair presentation of the Financial Information in accordance with the basis as set out in Section B below and the applicable disclosure provisions of the Listing Rules, and for such internal control as the directors of the Target determine is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

REPORTING ACCOUNTANTS’ RESPONSIBILITY FOR THE FINANCIAL INFORMATION

Our responsibility is to express an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline No. 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. We have not audited any financial statements of the Target Group in respect of any period subsequent to 31 August 2015.

OPINION

In our opinion, the Financial Information for the purpose of the report and on the basis as set out in Section B below, gives a true and fair view of the state of affairs of the Target and of the Target Group as at 31 December 2012, 2013, 2014 and 31 August 2015 and of the Target Group’s results and cash flows for the Relevant Periods.

– IIIA-3 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

CORRESPONDING FINANCIAL INFORMATION

For the purpose of this report, we have also reviewed the unaudited Corresponding Financial Information of the Target Group, for which the directors of the Target are responsible, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

The directors of the Target are responsible for the preparation of the Corresponding Financial Information in accordance with the accounting policies adopted in respect of the Financial Information. Our responsibility is to express a conclusion on the Corresponding Financial Information based on our review.

A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on the Corresponding Financial Information.

Based on our review, for the purpose of this report, nothing has come to our attention that causes us to believe that the Corresponding Financial Information is not prepared, in all material respects, in accordance with the accounting policies adopted in respect of the Financial Information.

Mazars CPA Limited Certified Public Accountants Hong Kong

– IIIA-4 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

A. FINANCIAL INFORMATION

Consolidated Statements of Comprehensive Income

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 Note RMB RMB RMB RMB RMB (unaudited)

Turnover 2 530,975,132 553,117,398 805,611,497 635,356,203 808,836,051 Cost of sales (393,592,158) (414,257,651) (601,275,482) (462,174,825) (459,960,428)

Gross profit 137,382,974 138,859,747 204,336,015 173,181,378 348,875,623 Other revenue and other income 3 691,963 2,012,252 1,378,417 977,122 22,171,801 Selling expenses (23,515,868) (29,951,488) (28,690,743) (14,700,167) (12,051,335) Administrative expenses (33,374,380) (45,784,967) (42,749,587) (26,996,551) (33,091,701) Other operating expenses (1,260,000) (564,320) (1,224,284) (164,517) (500,057) Changes in fair value of investment properties 12 123,176,063 56,673,149 151,948,204 118,248,121 17,731,608 Finance costs 4 (1,979,923) (474,474) (27,645,625) (19,539,841) (41,552,613)

Profit before tax 4 201,120,829 120,769,899 257,352,397 231,005,545 301,583,326 Income tax expense 5 (60,404,718) (29,811,712) (57,100,448) (51,868,736) (141,668,982)

Profit for the year/period and total comprehensive income for the year/period 140,716,111 90,958,187 200,251,949 179,136,809 159,914,344

Profit for the year/period and total comprehensive income attributable to: Owners of the Target 96,364,354 67,535,133 140,824,540 128,065,018 103,352,292 Non-controlling interests 44,351,757 23,423,054 59,427,409 51,071,791 56,562,052

140,716,111 90,958,187 200,251,949 179,136,809 159,914,344

– IIIA-5 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Consolidated Statements of Financial Position

As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Non-current assets Investment properties 12 197,000,000 342,000,000 639,000,000 660,000,000 Property, plant and equipment 13 6,207,688 11,237,522 8,495,886 8,920,997 Goodwill 14 – – – 4,999,430 Deferred tax assets 25 3,593,242 9,584,814 26,780,696 20,704,794

206,800,930 362,822,336 674,276,582 694,625,221

Current assets Properties under development and completed properties held for sale 15 1,336,042,336 1,538,970,142 2,918,494,886 2,888,115,074 Other receivables 16 849,225,022 1,187,227,583 1,258,910,432 638,687,866 Prepaid income tax 27,344,656 46,512,568 67,638,481 41,758,662 Cash and bank balances 17 254,332,887 472,176,646 107,976,726 145,067,494

2,466,944,901 3,244,886,939 4,353,020,525 3,713,629,096

Current liabilities Trade and other payables 18 652,925,708 744,198,533 1,325,730,755 1,268,378,922 Deposits from sale of properties 19 1,344,381,781 1,728,767,629 1,578,771,823 950,060,579 Deferred income 20 – – 55,005,000 33,511,804 Interest-bearing borrowings 21 – 60,000,000 220,000,000 532,400,000 Tax payables – 12,486,297 31,597,252 122,542,609

1,997,307,489 2,545,452,459 3,211,104,830 2,906,893,914

Net current assets 469,637,412 699,434,480 1,141,915,695 806,735,182 Total assets less current liabilities 676,438,342 1,062,256,816 1,816,192,277 1,501,360,403

Non-current liabilities Deferred income 20 2,210,000 30,502,000 1,040,000 1,040,000 Interest-bearing borrowings 21 300,000,000 552,400,000 306,600,000 250,000,000 Deferred tax liabilities 25 30,794,016 44,962,303 288,895,839 293,328,741

333,004,016 627,864,303 596,535,839 544,368,741

NET ASSETS 343,434,326 434,392,513 1,219,656,438 956,991,662

– IIIA-6 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Capital and reserves Share capital 22 – – 6 60,886 Reserves 264,113,684 331,648,817 852,731,137 751,923,509

Equity attributable to owners of the Target 264,113,684 331,648,817 852,731,143 751,984,395 Non-controlling interests 79,320,642 102,743,696 366,925,295 205,007,267

TOTAL EQUITY 343,434,326 434,392,513 1,219,656,438 956,991,662

– IIIA-7 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Statements of Financial Position

As at As at 31 December 31 August 2014 2015 Note RMB RMB

Non-current asset Investment in subsidiaries 11 11

Current assets Other receivables 16 6 60,886 Cash and bank balances 17 55,524 53,084

55,530 113,970

Current liability Other payables 18 55,525 57,800

Net current assets 5 56,170

NET ASSETS 6 56,171

Capital and reserves Share capital 22 6 60,886 Accumulated losses 23 – (4,715)

TOTAL EQUITY 6 56,171

– IIIA-8 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Consolidated Statements of Changes in Equity

Attributable to owners of the Target

(Accumulated losses) Non- Share Statutory Merger retained controlling capital reserve reserve earnings Sub-total interests Total (Note 22(b)) (Note 22(b)) RMB RMB RMB RMB RMB RMB RMB

At 1 January 2012 – – 110,000,000 (32,250,670) 77,749,330 34,968,885 112,718,215 Profit for the year and total comprehensive income for the year – – – 96,364,354 96,364,354 44,351,757 140,716,111

Capital injection for Ground Real Estate (Note 22(b)) – – 90,000,000 – 90,000,000 – 90,000,000 Transfer to statutory reserve – 5,094,230 – (5,094,230) – – –

At 31 December 2012 – 5,094,230 200,000,000 59,019,454 264,113,684 79,320,642 343,434,326

At 1 January 2013 – 5,094,230 200,000,000 59,019,454 264,113,684 79,320,642 343,434,326 Profit for the year and total comprehensive income for the year – – – 67,535,133 67,535,133 23,423,054 90,958,187

Transfer to statutory reserve – 4,868,877 – (4,868,877) – – –

At 31 December 2013 – 9,963,107 200,000,000 121,685,710 331,648,817 102,743,696 434,392,513

At 1 January 2014 – 9,963,107 200,000,000 121,685,710 331,648,817 102,743,696 434,392,513 Profit for the year and total comprehensive income for the year – – – 140,824,540 140,824,540 59,427,409 200,251,949

Issue of shares 6–––6–6 Common control combination (Note 26) – – 380,257,780 – 380,257,780 204,754,190 585,011,970 Transfer to statutory reserve – 8,101,678 – (8,101,678) – – –

At 31 December 2014 6 18,064,785 580,257,780 254,408,572 852,731,143 366,925,295 1,219,656,438

– IIIA-9 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Attributable to owners of the Target (Accumulated losses) Non- Share Statutory Merger retained controlling capital reserve reserve earnings Sub-total interests Total (Note 22(b)) (Note 22(b)) RMB RMB RMB RMB RMB RMB RMB

At 1 January 2015 6 18,064,785 580,257,780 254,408,572 852,731,143 366,925,295 1,219,656,438 Profit for the period and total comprehensive income for the period – – – 103,352,292 103,352,292 56,562,052 159,914,344

Issue of shares 60,880 – – – 60,880 – 60,880 Capital injection for Ground Real Estate (Note 22(b)) – – 200,000,000 – 200,000,000 – 200,000,000 Dividend paid to previous equity holders of Ground Real Estate (Note 10) – – – (145,000,000) (145,000,000) – (145,000,000) Dividend paid to non-controlling equity holders (Note 10) –––––(35,640,000) (35,640,000) Acquisition of additional interest in subsidiaries (Note 11) – – – 140,840,080 140,840,080 (182,840,080) (42,000,000) Distribution arising from the Ground Real Estate Acquisition (Note 22(b)) – – (400,000,000) – (400,000,000) – (400,000,000) Transfer to statutory reserve – 3,024,552 – (3,024,552) – – –

At 31 August 2015 60,886 21,089,337 380,257,780 350,576,392 751,984,395 205,007,267 956,991,662

(unaudited) At 1 January 2014 – 9,963,107 200,000,000 121,685,710 331,648,817 102,743,696 434,392,513 Profit for the period and total comprehensive income for the period – – – 128,065,018 128,065,018 51,071,791 179,136,809

Issue of shares 6–––6–6 Common control combination (Note 26) – – 380,257,780 – 380,257,780 204,754,190 585,011,970 Transfer to statutory reserve – 5,400,000 – (5,400,000) – – –

At 31 August 2014 6 15,363,107 580,257,780 244,350,728 839,971,621 358,569,677 1,198,541,298

– IIIA-10 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Consolidated Statements of Cash Flows

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 Note RMB RMB RMB RMB RMB (unaudited)

OPERATING ACTIVITIES Cash generated from (used in) operations 24 82,931,377 (274,667,293) 200,217,679 338,556,524 (3,348,670) Interest paid (37,073,047) (44,293,224) (73,449,072) (56,130,465) (35,280,489) PRC Land Appreciation Tax paid (14,966,665) (26,776,462) (20,508,618) (14,397,059) (6,388,619) PRC Enterprise Income Tax paid (5,541,565) (1,540,150) (17,582,228) (16,536,885) (7,946,383)

Net cash generated from (used in) operating activities 25,350,100 (347,277,129) 88,677,761 251,492,115 (52,964,161)

INVESTING ACTIVITIES Interest received 665,616 2,002,795 727,709 421,567 163,658 Net cash outflow in respect of common control combination 26 – – (1,800,098) (1,800,098) – Net cash inflow from acquisition of a subsidiary 27(a) ––––893,354 Proceeds from disposal of property, plant and equipment – – 577,878 382,246 556,839 Additional capital expenditure on investment properties (73,823,937) (88,326,851) (145,051,796) (76,918,365) (3,268,392) Payment for purchases of property, plant and equipment (1,717,253) (8,092,324) (1,603,140) (970,131) (2,220,767)

Net cash used in investing activities (74,875,574) (94,416,380) (147,149,447) (78,884,781) (3,875,308)

– IIIA-11 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 Note RMB RMB RMB RMB RMB (unaudited)

FINANCING ACTIVITIES New advance from (repayment of) related companies 18,666,834 (61,946,000) 321,002,443 183,085,231 (68,015,812) (Repayment of) new advance from fellow subsidiaries (95,932,714) 72,270,000 – – – Repayment of immediate holding company (30,000,000) – (6) (6) (60,880) (Repayment of) new advance from non-controlling interest (19,000,000) (25,000,000) (10,000,000) (10,000,000) 16,000,000 Issueofshares ––6660,880 Capital injection for Ground Real Estate Group 22(b) 90,000,000 – – – 200,000,000 Dividend paid to previous equity holders of Ground Real Estate 10 ––––(145,000,000) Dividend paid to non-controlling equity holders 10 ––––(35,640,000) Acquisition of additional interest in subsidiaries 11 ––––(42,000,000) New borrowings 500,000,000 312,400,000 – – 340,000,000 Repayment of borrowings (210,000,000) – (335,800,000) (275,800,000) (84,200,000)

Net cash generated from (used in) financing activities 253,734,120 297,724,000 (24,797,557) (102,714,769) 181,144,188

Net increase (decrease) in cash and cash equivalents 204,208,646 (143,969,509) (83,269,243) 69,892,565 124,304,719 Cash and cash equivalents at the beginning of the year/period 36,632,953 240,841,599 96,872,090 96,872,090 13,602,847

Cash and cash equivalents at the end of the year/period 17 240,841,599 96,872,090 13,602,847 166,764,655 137,907,566

– IIIA-12 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

B. NOTES TO THE FINANCIAL INFORMATION

Corporate Information

Ka Yun Investments Limited (the “Target”) is a limited liability company incorporated in the British Virgin Islands (the “BVI”) on 4 April 2014. The Target’s registered office is located at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, the BVI. The immediate holding company and, in the opinion of the directors, the ultimate holding company of the Target is Ka Yik Investments Limited (“Ka Yik”), which is incorporated in the BVI. The principal activity of the Target is investment holding. The principal activities of its subsidiaries are detailed in note 11 to the Financial Information.

Basis of Presentation

The Target directly or indirectly holds the entire equity interest in Xin Rui Investments Limited (“Xin Rui”), Jilin Province Xinrui Enterprise Management Consultation Co., Ltd. (“Jilin Xinrui”), 吉林省融利投資有限公司 (Jilin Rongli Investment Company Limited#) (“Jilin Rongli”) and 吉林省融裕投資有限公司 (Jilin Rongyu Investment Company Limited#) (“Jilin Rongyu”), all of which are wholly-owned subsidiaries (together with the Target collectively referred to as the “New Holding Companies”), prior to the acquisition of the entire equity interest in Ground Real Estate Group Company Limited (“Ground Real Estate”) and its subsidiaries (collectively referred to as “Ground Real Estate Group”) (the “Ground Real Estate Acquisition”) on 14 May 2015.

Ground Real Estate Group

Pursuant to the Confirmatory Deed dated 10 December 2014, a group of companies (including Ground Investment Holding) that are ultimately and beneficially owned by Mr. Cui and Ms. Chai transferred their 100% equity interest in Ground Real Estate and 65% equity interest in Jilin Ground Tourism Investment to Ms. Cui by way of a gift and nominee arrangement with effect from 1 January 2014. Since that date, Ms. Cui became the controlling party of Ground Real Estate and Jilin Ground Tourism Investment.

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Acquisition of Ground Real Estate Group

On 14 May 2015, Jilin Rongli and Jilin Rongyu entered into a share transfer agreement with Ground Investment Holding, 吉林省東秀投資有限公司 (Jilin Dongxiu Investment Company Limited#) (“Jilin Dongxiu”) and 長春東秀投資有限公司 (Changchun Dongxiu Investment Company Limited#) (“Changchun Dongxiu”) to transfer their respective equity interest in Ground Real Estate to Jilin Rongli and Jilin Rongyu.

Immediately after the Ground Real Estate Acquisition on 14 May 2015, the Target became the holding company of Ground Real Estate Group (collectively the “Target Group”).

The Financial Information comprises financial statements of the Target and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated Financial Information. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss.

For the purpose of this report, the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows of the Target Group for the Relevant Periods include the results and cash flows of all companies now comprising the Target Group, as if the Target had been the holding company of Ground Real Estate Group throughout the Relevant Periods. The consolidated statements of financial position of the Target Group as at 31 December 2012, 2013, 2014 and 31 August 2015 have been prepared to present the state of affairs of the Target Group as if the Target had been the holding company of Ground Real Estate Group at these dates.

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1. PRINCIPAL ACCOUNTING POLICIES

Statement of compliance

The Financial Information has been prepared in accordance with the accounting polices set out below, which conform with HKFRSs, which collective term includes all applicable HKFRSs, Hong Kong Accounting Standards (“HKAS”) and Interpretations issued by the HKICPA and accounting principles generally accepted in Hong Kong.

The Financial Information also complies with the disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The HKICPA has issued a number of new and revised HKFRSs during the Relevant Periods. For the purpose of preparing the Financial Information, the Target Group has consistently adopted all these HKFRSs that are relevant to its operations and are effective for the Relevant Periods.

Basis of measurement

The measurement basis used in the preparation of the Financial Information is the historical cost basis except for investment properties which are measured at fair value as explained in the accounting policies set out below.

Business combination and basis of consolidation

Under the acquisition method, the consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Target Group, liabilities assumed by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. The identifiable assets acquired and liabilities assumed are principally measured at acquisition-date fair value. For each business combination, the acquirer measures the non-controlling interest that represents a present ownership interest in the subsidiary in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs are expensed as incurred.

Consolidation of a subsidiary commences when the Target obtains control over the subsidiary and ceases when the Target loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the Relevant Periods are consolidated from the date the Target gains control until the date when the Target ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Target and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Target and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Target’s accounting policies. All intragroup balances and transactions are eliminated in full on consolidation. Non-controlling interests in subsidiaries are presented separately in equity from owners of the Target.

Changes in the Target’s ownership interests in existing subsidiaries

Changes in the Target’s ownership interests in existing subsidiaries that do not result in the Target losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of The Target’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the Target.

Merger accounting for business combination involving entities under common control

The Financial Information incorporates the financial statement items of the combining entities or businesses in which the common control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the control of the controlling party.

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The net assets of the combining entities or businesses are combined using the existing book values from the controlling party’s perspective. No amount is recognised in respect of goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party’s interest.

The consolidated statements of comprehensive income include the results of each of the combining entities or businesses from the earliest date presented or since the date when the combining entities or businesses first came under the common control, where this is a shorter period, regardless of the date of the common control combination.

Subsidiaries

A subsidiary is an entity that is controlled by the Target. The Target controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Target reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

In the Target’s statements of financial position, an investment in subsidiary is stated at cost less impairment loss. The carrying amount of the investment is reduced to its recoverable amount on an individual basis, if it is higher than the recoverable amount. The results of subsidiaries are accounted for by the Target on the basis of dividends received and receivable.

Goodwill

Goodwill on acquisition of subsidiary is recognised as a separate asset and is carried at cost less accumulated impairment losses, which is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment test and determination of gain or loss on disposal, goodwill is allocated to cash-generating units. An impairment loss on goodwill is not reversed.

On the other hand, any excess of the acquisition date amounts of identifiable assets acquired and the liabilities assumed of the acquired subsidiary over the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree, if any, after reassessment, is recognised immediately in profit or loss as an income from bargain purchase.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model. Gains and losses arising from changes in fair value of investment property are included in profit or loss for the period in which they arise.

Property under construction or development for future use as an investment property is classified as investment property under development and is initially measured at cost and subsequently at fair values using the fair value model. If the fair value cannot be reliably determined, the investment property under development will be measured at cost less impairment until such time as fair value can be determined or development is completed, in which time any difference between the fair value and the previous carrying amount is recognised in profit or loss in that period.

Construction costs incurred for investment properties under development are capitalised as part of the carrying amount of the investment properties under development.

Borrowing costs are capitalised as part of the carrying amount of the investment properties under development in accordance with the Target Group’s accounting policy.

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Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Repair and maintenance are charged to profit or loss for the period in which they are incurred.

Depreciation is provided to write off the cost less accumulated impairment losses of property, plant and equipment over their estimated useful lives from the date on which they are available for use and after taking into account their estimated residual values, using the straight-line method at the annual rate as set out below. Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis and depreciated separately:

Motor vehicles 25% Plant and machinery 10% Furniture, fixtures and office equipment 33%

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognised.

Properties under development

Properties under development are stated at the lower of cost and net realisable value. Net realisable value takes into account the price ultimately expected to be realised, less applicable variable selling expenses and anticipated cost to completion. Development cost of property comprises mainly construction costs, cost of land use rights, borrowing costs, and professional fees incurred during the development period. On completion, the properties are transferred to completed properties held for sale.

Completed properties held for sale

Completed properties remaining unsold at the end of each reporting period are stated at the lower of cost and net realisable value. Cost comprises development costs attributable to the unsold properties. Net realisable value is determined by reference to the estimated selling price in the ordinary course of business, less applicable estimated selling expenses to make the sale.

Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when and only when the Target Group becomes a party to the contractual provisions of the instruments and on a trade date basis.

A financial asset is derecognised when and only when (i) the Target Group’s contractual rights to future cash flows from the financial asset expire or (ii) the Target Group transfers the financial asset and either (a) the Target Group has transferred substantially all the risks and rewards of the financial asset or (b) the Target Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset but it does not retain control of the financial asset.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the relevant contract is discharged, cancelled or expires.

Classification and measurement

Financial assets or financial liabilities are initially recognised at their fair value plus, in the case of financial assets or financial liabilities not carried at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial assets or financial liabilities.

1) Loans and receivables

Loans and receivables include other receivables that are (i) non-derivative financial assets with fixed or determinable payments, (ii) not quoted in an active market and (iii) not held for trading.

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They are measured at amortised cost using the effective interest method, except where receivables are interest-free loans and without any fixed repayment term or the effect of discounting would be insignificant. In such case, the receivables are stated at cost less impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition over the year to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in profit or loss.

2) Financial liabilities

The Target Group’s financial liabilities include trade and other payables and interest-bearing borrowings. All financial liabilities except for derivatives are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.

Impairment of financial assets

At the end of each reporting period, the Target Group assesses whether there is objective evidence that financial assets, other than those at fair value through profit or loss, are impaired. The impairment loss of financial assets carried at amortised cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flow discounted at the financial asset’s original effective interest rate. Such impairment loss is reversed in subsequent periods through profit or loss when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment of non-financial assets

At the end of each reporting period, the Target Group reviews internal and external sources of information to determine whether there is any indication that its property, plant and equipment may be impaired or impairment loss previously recognised no longer exists or may be reduced. If any such indication exists, the recoverable amount of the asset is estimated, based on the higher of its fair value less costs of disposal and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the Target Group estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. cash-generating unit).

If the recoverable amount of an asset or a cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately.

A reversal of impairment loss is limited to the carrying amount of the asset or cash-generating unit that would have been determined had no impairment loss been recognised in prior years. Reversal of impairment loss is recognised as income in profit or loss immediately.

Cash equivalents

For the purpose of the consolidated statements of cash flows, cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, net of bank overdrafts.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

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Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Target Group and when the revenue and costs, if applicable can be measured reliably on the following bases:

Revenue from sales of properties is recognised when the risks and rewards of properties are transferred to the purchasers, which is when the construction of relevant properties has been completed and the properties have been delivered to the purchasers and collectability of related receivables is reasonably assured. To the extent that the Target Group has to perform further work on the properties already delivered to the purchasers, the relevant expenses shall be recognised simultaneously. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the “Deposits from sale of properties” under current liabilities.

Rental income in respect of properties under operating leases is recognised on a straight-line basis over the respective lease term.

Revenue from the provision of property management services is recognised when the relevant services are provided.

Interest income from financial assets is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Borrowing costs

Borrowing costs incurred, net of any investment income on the temporary investment of the specific borrowings, that are directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised as an expense in the period in which they are incurred.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant related to an asset, it is recognised as income on a systematic basis over the useful life of the asset or deduct the grant in calculating the carrying amount of the asset and recongised as income over the life of the depreciable asset. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Employee benefits

Short term employee benefits

Defined contribution plans

The employees of the Target Group in the PRC are members of the state-managed retirement benefits schemes operated by the government. The Target Group is required to contribute a specified percentage of their payroll costs to the retirement benefits schemes. The only obligation of the Target Group with respect to the retirement benefits schemes is to make the specified contributions.

Taxation

The charge for current income tax is based on the results for the each reporting period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

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Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts in the Financial Information. However, if the deferred tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting profit nor taxable profit or loss is not recognised.

The deferred tax liabilities and assets are measured at the tax rates that are expected to apply to the period when the asset is recovered or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the end of the reporting period. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, tax losses and credits can be utilised.

Foreign currency translation

Items included in the Financial Information are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The Financial Information is presented in the currency of Renminbi (“presentation currency”), which is the Target Group’s functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Segment reporting

Operating segments, and the amounts of each segment item reported in the Financial Information, are identified from the financial information provided regularly to the Target Group’s chief operating decision makers. The Target Group’s executive directors, who are responsible for allocating resources to, and assessing the performance of, the Target Group’s various lines of business, have been identified as the chief operating decision makers.

Individual material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria.

Related parties

A related party is a person or entity that is related to the Target Group.

(a) A person or a close member of that person’s family is related to the Target Group if that person:

(i) has control or joint control over the Target Group;

(ii) has significant influence over the Target Group; or

(iii) is a member of the key management personnel of the Target Group or of the parent of the Target Group.

(b) An entity is related to the Target Group if any of the following conditions applies:

(i) The entity and the Target Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

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(v) The entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any of a group of which it is a part, provides key management personnel services to the Target Group or to its parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

Critical accounting estimates and judgements

Estimates and assumptions concerning the future and judgements are made by the management in the preparation of the Financial Information. They affect the application of the Target Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Where appropriate, revisions to accounting estimates are recognised in the period of revision and future periods, in case the revision also affects future periods.

Allocation of construction cost on properties under development

When developing properties, the Target Group typically divides the development projects into phases. Costs directly related to the development of a phase are recorded as the cost of such phase. Costs that are common to several phases are allocated to each phase based on the saleable floor area of each phase as a percentage of the total saleable floor area of the entire project. The cost of the properties sold is determined by the floor area in square meters sold multiplied by the average cost per square meter of that particular phase of the project.

PRC Land Appreciation Taxes

The Target Group is subject to land appreciation taxes in the PRC. However, the implementation and settlement of these taxes varies among various cities in the PRC, and the Target Group has not finalised its land appreciation taxes calculation and payments with any local tax authorities in the PRC. Accordingly, significant judgement is required in estimating the amount of the land appreciation taxes. The Target Group recognised these land appreciation taxes based on management’s best estimates according to the interpretation of the tax rules. The final tax liabilities could be different from the amounts that were initially recorded, and these differences will impact the income tax expense and tax provisions in the periods in which such taxes have been finalised with local tax authorities.

Deferred tax on investment properties

For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties that are measured using the fair value model, the management of the Target Group has reviewed the Target Group’s investment property portfolios and considered that they are held under a business model whose objective is to consume substantially all of the economic benefits embodied in these investment properties over time. Therefore, the management of the Target Group has determined that the presumption that the carrying amounts of investment properties measured using the fair value model are recovered entirely through sale is rebutted. As a result, the Target Group did not recongise deferred taxes on Land Appreciation Tax and only recognised deferred taxes on Enterprise Income Tax in respect of the changes in fair value of the Target Group’s investment properties on the basis that the entire carrying amounts of these properties are recovered through use.

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Valuation of investment properties

Investment properties are stated at fair value based on the valuation performed by independent professional valuers. In determining the fair value, the valuers have based on a method of valuation which involves certain estimates of market conditions. In relying on the valuation report, the management of the Target Group has exercised the judgments and is satisfied that the assumptions used in the valuation are reflective of the current market conditions. Changes to these assumptions would result in changes in the fair value of the Target Group’s investment properties and the corresponding adjustments to the amount of gain or loss would be recognised in profit or loss. Details are set out in Note 12.

Future changes in HKFRSs

At the date of issue of the Financial Information, the HKICPA has issued a number of new/revised HKFRSs that are not yet effective for the Relevant Periods, which the Target Group has not early adopted. The management does not anticipate that the adoption of these new/revised HKFRSs in future periods will have any material impact on the results of the Target Group.

2. TURNOVER AND SEGMENT INFORMATION

The executive directors of the Target have been identified as the chief operating decision-makers (“CODM”) of the Target Group who are responsible for reviewing the Target Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Target Group is organised into several business segments: property development, property investment and property management and related services.

The CODM of the Target Group assesses the performance of the operating segments based on a measure of segment results. Finance costs or income are not included in the result for each operating segment.

Segment assets include all assets with the exception of deferred tax assets, prepared income tax and unallocated assets which includes property, plant and equipment, other receivables and cash and bank balances.

Segment liabilities include all liabilities with the exception of deferred tax liabilities and unallocated liabilities which includes other payables.

Turnover during the Relevant Periods and the eight months ended 31 August 2014 consists of sales of properties, rental income and revenue from property management and related services, which are set out below:

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Sales of properties 526,555,469 543,958,383 794,241,618 627,001,719 781,076,669 Rental income ––––10,406,296 Revenue from property management and related services 4,419,663 9,159,015 11,369,879 8,354,484 17,353,086

530,975,132 553,117,398 805,611,497 635,356,203 808,836,051

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Segment information

The following is an analysis of the Target Group’s revenue and results by reportable segments.

Property Property Property management and development investment related services Total RMB RMB RMB RMB

Year ended 31 December 2012 Segment revenue External customers 526,555,469 – 4,419,663 530,975,132

Segment results External customers 85,584,325 119,598,090 (751,438) 204,430,977

Unallocated corporate income and other gains 691,963 Unallocated corporate expenses and other losses (2,022,188) Finance costs (1,979,923)

Profit before tax 201,120,829

Assets Segment assets 1,336,042,336 197,000,000 – 1,533,042,336 Deferred tax assets 3,593,242 Prepaid income tax 27,344,656 Unallocated assets 1,109,765,597

Total assets 2,673,745,831

Liabilities Segment liabilities (1,804,107,268) (25,988,509) (1,314,093) (1,831,409,870) Deferred tax liabilities (30,794,016) Unallocated liabilities (468,107,619)

Total liabilities (2,330,311,505)

Other information Capital expenditure 962,904 73,910,744 56,422 74,930,070 Expenditure on property under development 991,727,705 – – 991,727,705 Increase in fair value of investment properties – 123,176,063 – 123,176,063 Depreciation* 1,439,373 29,213 29,990 1,498,576

* Depreciation of RMB576,607 was included in the unallocated corporate expenses and other losses.

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Property Property Property management and development investment related services Total RMB RMB RMB RMB

Year ended 31 December 2013 Segment revenue External customers 543,958,383 – 9,159,015 553,117,398

Segment results External customers 71,097,935 51,842,788 (1,520,135) 121,420,588

Unallocated corporate income and other gains 2,012,252 Unallocated corporate expenses and other losses (2,188,467) Finance costs (474,474)

Profit before tax 120,769,899

Assets Segment assets 1,538,970,142 342,000,000 – 1,880,970,142 Deferred tax assets 9,584,814 Prepaid income tax 46,512,568 Unallocated assets 1,670,641,751

Total assets 3,607,709,275

Liabilities Segment liabilities (2,412,494,508) (127,424,019) (5,574,855) (2,545,493,382) Tax payables (12,486,297) Deferred tax liabilities (44,962,303) Unallocated liabilities (570,374,780)

Total liabilities (3,173,316,762)

Other information Capital expenditure 5,601,473 88,372,341 316,974 94,270,788 Expenditure on property under development 617,344,289 – – 617,344,289 Increase in fair value of investment properties – 56,673,149 – 56,673,149 Depreciation* 1,943,705 56,242 52,091 2,052,038

* Depreciation of RMB1,010,452 was included in the unallocated corporate expenses and other losses.

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Property Property Property management and development investment related services Total RMB RMB RMB RMB

Year ended 31 December 2014 Segment revenue External customers 794,241,618 – 11,369,879 805,611,497

Segment results External customers 141,100,077 148,522,003 (3,457,135) 286,164,945

Unallocated corporate income and other gains 1,378,417 Unallocated corporate expenses and other losses (2,545,340) Finance costs (27,645,625)

Profit before tax 257,352,397

Assets Segment assets 2,918,494,886 639,000,000 – 3,557,494,886 Deferred tax assets 26,780,696 Prepaid income tax 67,638,481 Unallocated assets 1,375,383,044

Total assets 5,027,297,107

Liabilities Segment liabilities (2,381,017,384) (186,136,017) (6,300,079) (2,573,453,480) Tax payables (31,597,252) Deferred tax liabilities (288,895,839) Unallocated liabilities (913,694,098)

Total liabilities (3,807,640,669)

Other information Capital expenditure 1,495,225 145,055,842 47,769 146,598,836 Expenditure on property under development 740,135,792 – – 740,135,792 Increase in fair value of investment properties – 151,948,204 – 151,948,204 Depreciation* 2,358,150 100,170 114,710 2,573,030 Loss on disposal of property, plant and equipment 68,489 – – 68,489

* Depreciation of RMB1,125,379 was included in the unallocated corporate expenses and other losses.

– IIIA-25 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Property Property Property management and development investment related services Total RMB RMB RMB RMB

Eight months ended 31 August 2015 Segment revenue External customers 781,076,669 10,406,296 17,353,086 808,836,051

Segment results External customers 428,979,811 (62,516,626) (22,164,269) 344,298,916

Unallocated corporate income and other gains 209,208 Unallocated corporate expenses and other losses (1,372,185) Finance costs (41,552,613)

Profit before tax 301,583,326

Assets Segment assets 2,888,115,074 660,000,000 4,999,430 3,553,114,504 Deferred tax assets 20,704,794 Prepaid income tax 41,758,662 Unallocated assets 792,676,357

Total assets 4,408,254,317

Liabilities Segment liabilities 2,158,297,761 157,998,141 10,207,741 2,326,503,643 Tax payables 122,542,609 Deferred tax liabilities 293,328,741 Unallocated liabilities 708,887,662

Total liabilities 3,451,262,655

Other information Capital expenditure 76,500 3,276,892 1,755,156 5,108,548 Expenditure on property under development 560,028,130 – – 560,028,130 Increase in fair value of investment properties – 17,731,608 – 17,731,608 Depreciation* 892,788 26,215 346,771 1,265,774 Government grant income 14,185,509 7,307,687 – 21,493,196 Gain on disposal of property, plant and equipment 457,606 – – 457,606

* Depreciation of RMB430,649 was included in the unallocated corporate expenses and other losses.

– IIIA-26 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Property Property Property management and development investment related services Total RMB RMB RMB RMB

(unaudited) Eight months ended 31 August 2014 Segment revenue External customers 627,001,719 – 8,354,484 635,356,203

Segment results External customers 135,954,755 116,318,161 (1,704,916) 250,568,000

Unallocated corporate income and other gains 977,122 Unallocated corporate expenses and other losses (999,736) Finance costs (19,539,841)

Profit before tax 231,005,545

Other information Capital expenditure 877,015 76,922,411 32,970 77,832,396 Expenditure on property under development 1,154,017,398 – – 1,154,017,398 Increase in fair value of investment properties – 118,248,121 – 118,248,121 Depreciation* 1,033,647 25,097 71,232 1,129,976

* Depreciation of RMB740,401 was included in the unallocated corporate expenses and other losses.

Geographical information

The Target Group’s operations are all located in the PRC. Accordingly, no geographical segment information on revenue from external customers and specified non-current assets is presented.

Information about major customers

No sales to a single customer or a group of customers under common control accounted for 10% or more of the Target Group’s revenue for the Relevant Periods and for the eight months ended 31 August 2014.

3. OTHER REVENUE AND OTHER INCOME

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Bank interest income 665,616 2,002,795 727,709 421,567 163,658 Government grant income (Note 20) ––––21,493,196 Gain on disposal of property, plant and equipment ––––457,606 Sundry income 26,347 9,457 650,708 555,555 57,341

691,963 2,012,252 1,378,417 977,122 22,171,801

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4. PROFIT BEFORE TAX

This is stated after charging/(crediting):

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Finance costs Interest on bank and other borrowings wholly repayable within five years 37,073,047 44,293,224 73,449,072 56,130,465 44,364,873 Less: Interest expense capitalised into properties under development and investment properties (35,093,124) (43,818,750) (45,803,447) (36,590,624) (2,812,260)

1,979,923 474,474 27,645,625 19,539,841 41,552,613

Interest expenses capitalised for the years ended 31 December 2012 and 2013 are calculated by applying a weighted average capitalisation rate of its general borrowings ranging from 10% to 18% per annum to expenditure on qualifying assets. Interest expenses capitalised for the year ended 31 December 2014 and the eight months ended 31 August 2015 and 31 August 2014 are related to borrowings for specific property development projects.

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Other items Employee benefits expense (including directors’ emoluments) 27,227,189 32,268,651 35,792,358 22,930,037 23,731,118 Contributions to defined contribution plan 2,812,694 3,088,293 4,181,446 2,287,035 9,543,200

Total staff costs 30,039,883 35,356,944 39,973,804 25,217,072 33,274,318 Less: Amount capitalised into properties under development and investment properties (9,647,992) (11,192,421) (13,964,854) (7,879,804) (12,455,971)

20,391,891 24,164,523 26,008,950 17,337,268 20,818,347

Depreciation 2,075,183 3,062,490 3,698,409 1,870,377 1,696,423 Cost of properties sold 393,592,158 414,257,651 601,275,482 462,174,825 444,656,836 Cost of rental ––––15,303,592 Loss on disposal of property, plant and equipment – – 68,489 – –

– IIIA-28 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

5. INCOME TAX EXPENSE

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Current tax PRC Enterprise Income Tax 20,130,463 21,634,997 36,075,888 33,931,396 43,818,956 PRC Land Appreciation Tax 12,659,008 – – – 87,341,222

32,789,471 21,634,997 36,075,888 33,931,396 131,160,178

Deferred taxation Origination and reversal of temporary difference 30,794,016 14,168,287 37,987,050 29,562,031 4,432,902 Benefit of tax losses (recognised)/reversed (3,178,769) (5,991,572) (16,962,490) (11,624,691) 6,075,902

27,615,247 8,176,715 21,024,560 17,937,340 10,508,804

Tax charge for the year/period 60,404,718 29,811,712 57,100,448 51,868,736 141,668,982

PRC Enterprise Income Tax (“EIT”) has been provided for the Relevant Periods and the eight months ended 31 August 2014 based on the estimated assessable profits in accordance with the relevant tax laws applicable to the Target Group in the PRC. The statutory EIT tax rate in the PRC is 25% for the Relevant Periods and the eight months ended 31 August 2014.

PRC Land Appreciation Tax (“LAT”) is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds from sale of properties less deductible expenditures including land costs, borrowing costs and other property development expenditures. The Target Group has estimated, made and included in taxation a provision for LAT according to the requirements set forth in the relevant PRC tax laws and regulations. The LAT provision is subject to the final review/approval by the local tax bureau.

– IIIA-29 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Reconciliation of tax expense

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Profit before tax 201,120,829 120,769,899 257,352,397 231,005,545 301,583,326

Tax expense for the year/period 60,404,718 29,811,712 57,100,448 51,868,736 141,668,982

6. DIRECTORS’ EMOLUMENTS

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Directors’ emoluments Fees ––––– Other emoluments –––––

–––––

During the Relevant Periods and the eight months ended 31 August 2014, no directors waived or agreed to waive any emoluments, and no emoluments have been paid to the directors or any employee as an inducement to join or upon joining the Target or as compensation for loss of office.

– IIIA-30 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

7. INDIVIDUALS WITH HIGHEST EMOLUMENTS

The highest emoluments in respect of the five individuals are as follows:

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Salaries, allowance and benefits in kind 1,391,218 1,187,069 1,857,885 1,727,900 1,932,782 Contribution to defined contribution retirement plans 157,737 180,682 179,591 113,091 230,504

Total 1,548,955 1,367,751 2,037,476 1,840,991 2,163,286

The emoluments of the above individuals with the highest emoluments are within the following band:

Number of individuals Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 (unaudited)

Nil to HK$1,000,000 55555

8. EARNINGS PER SHARE

No earnings per share for the Relevant Periods and the eight months ended 31 August 2014 is presented as its inclusion is considered not meaningful for the purpose of this report.

9. LOSS ATTRIBUTABLE TO OWNERS OF THE TARGET

The consolidated loss attributable to owners of the Target included a loss of RMB Nil and RMB4,715 for the period ended 31 December 2014 and the period ended 31 August 2015 respectively and a loss of RMB Nil for the period ended 31 August 2014 which has been dealt with in the financial statements of the Target.

10. DIVIDENDS

A dividend of RMB145,000,000 declared by Ground Real Estate was approved by its then equity holders on 25 March 2015.

A dividend of RMB198,000,000 declared by 吉林省廣澤地產開發有限公司 (Jilin Ground Real Estate Company Limited#) (“Jilin Ground Real Estate”), a subsidiary of the Target Group was approved by its equity holders on 25 March 2015 of which RMB35,640,000 were attributable to its non-controlling equity holders.

– IIIA-31 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

11. INVESTMENT IN SUBSIDIARIES

The Target As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Unlisted equity interest ––11

All subsidiaries are limited liability companies. Details of the subsidiaries at the end of the reporting periods are as follows:

Place and date of incorporation/ Class of shares Name of subsidiary operation held Attributable interest of The Target Principal activities As at As at 31 December 31 August 2012 2013 2014 2015

Held directly by the Target Xin Rui Hong Kong 1 ordinary share – – 100% 100% Investment holding 7 April 2014 of total HK$1 Held indirectly by the Target Jilin Xinrui PRC Registered and – – 100% 100% Investment holding 16 December 2014 paid-up capital: HK$1,000,000 Jilin Rongli PRC Registered – – 100% 100% Investment holding 29 December 2014 capital: RMB20,000,000 Paid-up capital: Nil Jilin Rongyu PRC Registered – – 100% 100% Investment holding 29 December 2014 capital: RMB20,000,000 Paid-up capital: Nil Ground Real Estate PRC Registered and 100% 100% 100% 100% Investment holding 26 November 2010 paid-up capital: RMB400,000,000 Jilin Ground Real Estate PRC Registered and 82% 82% 82% 100% Property development (Note 1) 22 October 2009 paid-up capital: RMB100,000,000 白山市廣澤房地產開發有限公司 PRC Registered and 60% 60% 60% 100% Property development (Note 2) 8 August 2011 paid-up capital: (Baishan Ground Real Estate RMB50,000,000 Development Company Limited#) (“Baishan Ground Real Estate”) 延吉市惠澤房地產開發有限公司 PRC Registered and 100% 100% 100% 100% Property development (Yanji Huize Real Estate 24 May 2012 paid-up capital: Development Company RMB50,000,000 Limited#) (“Yanji Huize”)

– IIIA-32 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Place and date of incorporation/ Class of shares Name of subsidiary operation held Attributable interest of The Target Principal activities As at As at 31 December 31 August 2012 2013 2014 2015

Held indirectly by the Target 長春市築家房地產開發有限公司 PRC Registered and 100% 100% 100% 100% Property development (Changchun Zhujia Real Estate 7 December 2010 paid-up capital: Development Company RMB10,000,000 Limited#) (“Changchun Zhujia”) 吉林市築家房地產開發有限公司 PRC Registered and 60% 60% 60% 100% Property development (Note 3) 28 February 2011 paid-up capital: (Jilin Zhujia Real Estate RMB10,000,000 Development Company Limited#) (“Jilin Zhujia”) 吉林省科高房地產開發有限公司 PRC Registered and 100% 100% 100% 100% Property development (Jilin Kegao Real Estate 4 January 2011 paid-up capital: Development Company RMB10,000,000 Limited#) (“Jilin Kegao”) 吉林省廣澤物業投資有限公司 PRC Registered and 100% 100% 100% 100% Investment holding (Jilin Ground Property 4 July 2012 paid-up capital: Investment Company RMB2,000,000 Limited#) (“Jilin Ground Property Investment”) 吉林省廣澤旅遊開發有限公司 PRC Registered and – – 65% 65% Development of travel- (Jilin Ground Tourism 25 January 2013 paid-up capital: related projects Investment Co., Ltd#) (“Jilin RMB10,000,000 Ground Tourism Investment”) 吉林市廣澤物業服務有限公司 PRC Registered and 100% 100% 100% 100% Real estate (Jilin Ground Property 29 September 2010 paid-up capital: management Services Company Limited#) RMB3,000,000 (“Jilin Ground Property Services”) 白山市廣澤物業服務有限公司 PRC Registered and – 100% 100% 100% Real estate (Baishan Ground Property 24 paid-up capital: management Services Company Limited#) June 2013 RMB500,000 (“Baishan Ground Property Services”) 白山市廣澤商業管理有限公司 PRC Registered and – – – 100% Real estate (Baishan Ground Business 25 December 2012 paid-up capital: management Management Company RMB500,000 Limited#) (“Baishan Ground Business Management”) 撫松長白山廣澤旅遊開發有限公司 PRC Registered and – – 65% 65% Development of travel- (Fusong Changbaishan Ground 21 December 2011 paid-up capital: related projects Tourism Development RMB10,000,000 Company Limited#) (“Fusong Changbaishan”) 撫松廣澤房地產開發有限公司 PRC Registered and – – 65% 65% Property development (Fusong Ground Real Estate 6 July 2012 paid-up capital: Development Company RMB10,000,000 Limited#) (“Fusong Ground”)

– IIIA-33 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Place and date of incorporation/ Class of shares Name of subsidiary operation held Attributable interest of The Target Principal activities As at As at 31 December 31 August 2012 2013 2014 2015

Held indirectly by the Target 撫松果松會務服務有限公司 PRC Registered and – – 65% 65% Inactive (Fusong Guosong Conference 26 October 2012 paid-up capital: Services Company Limited#) RMB500,000 (“Fusong Guosong Conference”) 撫松果松特產有限公司 (Fusong PRC Registered and – – 65% 65% Inactive Guosong Specialty Company 26 October 2012 paid-up capital: Limited#) (“Fusong Guosong RMB500,000 Specialty”) 吉林省廣澤酒店管理有限公司 PRC Registered – – 65% 65% Inactive (Jilin Ground Hotel 18 November 2014 capital: Management Company RMB500,000 Limited#) (“Jilin Ground Hotel Paid-up capital: Management”) Nil

Note:

1. On 15 April 2015, Ground Real Estate entered into an equity transfer agreement with the non-controlling equity holders of Jilin Ground Real Estate, to acquire 18% of the equity interest in Jilin Ground Real Estate at a consideration of RMB18,000,000 and was completed on 12 May 2015. Upon completion, Jilin Ground Real Estate became a wholly-owned subsidiary of the Target Group.

2. On 15 April 2015, Ground Real Estate entered into an equity transfer agreement with 吉林省廣澤股權投資基金合夥企業（有限合夥）(Jilim Ground Equity Investment Fund Joint Venture (Limited Partnership)#) (“Jilin Ground Equity”), a related party of the Target Group, to acquire 40% of the equity interest in Baishan Ground Real Estate from Jilin Ground Equity at a consideration of RMB20,000,000 and was completed on 27 April 2015. Upon completion, Baishan Ground Real Estate became a wholly-owned subsidiary of the Target Group.

3. On 15 April 2015, Ground Real Estate entered into an equity transfer agreement with Jilin Ground Equity, a related party of the Target Group, to acquire 40% of the equity interest in Jilin Zhujia at a consideration of RMB4,000,000 from Jilin Ground Equity and was completed on 27 April 2015. Upon completion, Jilin Zhujia became a wholly-owned subsidiary of the Target Group.

The following summarised the consideration paid and the changes in the Target Group’s ownership interest in the subsidiaries:

Jilin Baishan Ground Ground Real Estate Real Estate Jilin Zhujia Total RMB RMB RMB RMB

Consideration paid 18,000,000 20,000,000 4,000,000 42,000,000 Non-controlling interest acquired (18,028,579) (167,327,578) 2,516,077 (182,840,080)

Recognised in equity (28,579) (147,327,578) 6,516,077 (140,840,080)

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Financial information of subsidiaries with individually material non-controlling interests (“NCI”)

The following table shows the information relating to each of the non-wholly owned subsidiaries that has material NCI. The summarised financial information represents amounts before inter-company eliminations.

Basishan Jilin Ground Ground Real Real Estate Estate Jilin Zhujia

At 31 December 2012 Proportion of NCI’s ownership interests 18% 40% 40%

RMB RMB RMB

Current assets 1,810,258,071 371,857,260 145,955,982 Non-current assets 3,943,848 199,838,787 72,605 Current liabilities (1,389,525,538) (406,273,183) (136,250,200) Non-current liabilities (300,000,000) (33,004,016) –

Net assets 124,676,381 132,418,848 9,778,387

Carrying amount of NCI 22,441,749 52,967,539 3,911,354

Basishan Jilin Ground Ground Real Real Estate Estate Jilin Zhujia RMB RMB RMB

Year ended 31 December 2012 Revenue 529,046,062 – – Changes in fair value of investment properties – 123,176,063 – Expenses (435,865,200) (10,481,399) (229,521) Income tax expense (32,789,471) (28,834,483) 72,605

Profit (loss) and total comprehensive income 60,391,391 83,860,181 (156,916)

Profit (loss) and total comprehensive income attributable to NCI 10,870,451 33,544,072 (62,766)

Net cash flows (used in) from: Operating activities (305,546,944) 228,505,864 17,174,089

Investing activities (408,107) (74,188,695) 21,466

Financing activities 300,000,000 – –

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Basishan Jilin Ground Ground Real Real Estate Estate Jilin Zhujia

At 31 December 2013 Proportion of NCI’s ownership interests 18% 40% 40%

RMB RMB RMB

Current assets 2,087,091,309 718,612,279 164,152,422 Non-current assets 7,055,616 348,000,123 1,712,932 Current liabilities (1,592,165,553) (586,966,597) (159,539,232) Non-current liabilities (312,400,000) (314,424,302) –

Net assets 189,581,372 165,221,503 6,326,122

Carrying amount of NCI 34,124,647 66,088,601 2,530,448

Baishan Jilin Ground Ground Real Real Estate Estate Jilin Zhujia RMB RMB RMB

Year ended 31 December 2013 Revenue 548,376,028 352,800 – Changes in fair value of investment properties – 56,673,149 – Expenses (461,836,042) (13,247,968) (4,603,019) Income tax expense (21,634,996) (10,975,326) 1,150,755

Profit (loss) and total comprehensive income 64,904,990 32,802,655 (3,452,264)

Profit (loss) and total comprehensive income attributable to NCI 11,682,898 13,121,062 (1,380,906)

Net cash flows (used in) from: Operating activities 19,225,341 (334,058,036) (24,809,529)

Investing activities (4,153,113) (87,354,588) (528,063)

Financing activities 12,400,000 300,000,000 –

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Baishan Jilin Ground Jilin Ground Ground Real Tourism Real Estate Estate Jilin Zhujia Investment

At 31 December 2014 Proportion of NCI’s ownership interests 18% 40% 40% 35%

RMB RMB RMB RMB

Current assets 1,593,295,530 1,036,723,623 146,322,197 1,240,859,322 Non-current assets 5,241,791 647,149,786 5,421,599 10,411,493 Current liabilities (1,014,128,289) (1,254,132,765) (155,806,218) (456,095,412) Non-current liabilities (286,600,000) (157,954,353) – (205,946,485)

Net assets (liabilities) 297,809,032 271,786,291 (4,062,422) 589,228,918

Carrying amount of NCI 53,605,626 108,714,517 (1,624,969) 206,230,121

RMB RMB RMB RMB

Year ended 31 December 2014 Revenue 799,840,303 335,700 – 2,355 Changes in fair value of investment properties – 151,948,204 – – Expenses (655,536,754) (10,164,445) (13,330,929) (5,830,775) Income tax expense (36,075,887) (35,554,671) 2,942,385 10,045,367

Profit (loss) and total comprehensive income 108,277,662 106,564,788 (10,388,544) 4,216,947

Profit (loss) and total comprehensive income attributable to NCI 19,480,980 42,625,915 (4,155,417) 1,475,931

Net cash flows from (used in): Operating activities 76,427,737 171,122,705 1,051,814 –

Investing activities 416,261 (144,919,896) (1,070,352) –

Financing activities (25,800,000) (60,000,000) – 4,699,902

– IIIA-37 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Baishan Jilin Ground Jilin Ground Ground Real Tourism Real Estate Estate Jilin Zhujia Investment

At 31 August 2015 Proportion of NCI’s ownership interests – – – 35%

Current assets 1,323,323,426 670,670,162 179,778,015 1,391,077,122 Non-current assets 4,926,624 660,123,270 5,340,438 10,405,894 Current liabilities (1,218,091,278) (768,948,900) (191,408,644) (359,801,482) Non-current liabilities (10,000,000) (143,525,589) – (455,946,485)

Net assets (liabilities) 100,158,772 418,318,943 (6,290,191) 585,735,049

Acquisition of NCI in subsidiaries without change in control 18,028,579 167,327,578 (2,516,077) –

Carrying amount of NCI – – – 205,007,267

Eight months ended 31 August 2015 Revenue 33,944,066 504,799,388 – 6,573 Changes in fair value of investment properties – 16,168,104 – – Expenses (29,984,687) (238,781,245) (2,227,769) (3,500,442) Income tax expense (3,609,640) (135,653,594) – –

Profit (loss) and total comprehensive income 349,739 146,532,653 (2,227,769) (3,493,869)

Profit (loss) and total comprehensive income attributable to NCI 62,953 58,613,061 (891,108) (1,222,854)

Net cash flows from (used in): Operating activities 193,792,041 4,686,720 (184,291) (194,817,086)

Investing activities – (4,850,849) 300 (8,301)

Financing activities (272,200,000) – – 300,000,000

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12. INVESTMENT PROPERTIES

Under development Completed Total RMB RMB RMB

At fair value At 1 January 2012 – – – Additional expenditure 73,823,937 – 73,823,937 Changes in fair value 123,176,063 – 123,176,063

At 31 December 2012/1 January 2013 197,000,000 – 197,000,000 Additional expenditure 88,326,851 – 88,326,851 Changes in fair value 56,673,149 – 56,673,149

At 31 December 2013/1 January 2014 342,000,000 – 342,000,000 Additional expenditure 145,051,796 – 145,051,796 Transfer (487,051,796) 487,051,796 – Changes in fair value – 151,948,204 151,948,204

At 31 December 2014/1 January 2015 – 639,000,000 639,000,000 Additional expenditure – 3,268,392 3,268,392 Changes in fair value – 17,731,608 17,731,608

At 31 August 2015 – 660,000,000 660,000,000

Investment properties of the Target Group are all located in the PRC and have medium term lease.

As at 31 December 2012, 2013, 2014 and 31 August 2015, the investment properties were revalued by Savills Valuation and Professional Services Limited, independent professional qualified valuers, on the market value basis using direct comparison approach.

As at 31 December 2012, 2013, 2014 and 31 August 2015, all of the Target Group’s investment properties with an aggregate carrying value at the end of the reporting period of RMB197,000,000, RMB342,000,000, RMB639,000,000 and RMB660,000,000 were pledged to secure banking facilities granted to the Target Group.

Fair value hierarchy disclosure is set out in note 31.

– IIIA-39 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

13. PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures and Motor Plant and office vehicles machinery equipment Total RMB RMB RMB RMB

Reconciliation of carrying amount – year ended 31 December 2012 At the beginning of the year 3,400,192 – 3,165,426 6,565,618 Additions 611,119 14,900 1,091,234 1,717,253 Depreciation (1,223,585) (118) (851,480) (2,075,183)

At the end of the year 2,787,726 14,782 3,405,180 6,207,688

Reconciliation of carrying amount – year ended 31 December 2013 At the beginning of the year 2,787,726 14,782 3,405,180 6,207,688 Additions 2,665,602 140,024 5,286,698 8,092,324 Depreciation (1,740,744) (2,117) (1,319,629) (3,062,490)

At the end of the year 3,712,584 152,689 7,372,249 11,237,522

Reconciliation of carrying amount – year ended 31 December 2014 At the beginning of the year 3,712,584 152,689 7,372,249 11,237,522 Additions 4,450 14,000 1,584,690 1,603,140 Disposal (219,939) (2,831) (423,597) (646,367) Depreciation (1,692,654) (18,660) (1,987,095) (3,698,409)

At the end of the year 1,804,441 145,198 6,546,247 8,495,886

Reconciliation of carrying amount – eight months ended 31 August 2015 At the beginning of the period 1,804,441 145,198 6,546,247 8,495,886 Additions – 24,580 2,196,187 2,220,767 Disposal (31,370) – (67,863) (99,233) Depreciation (541,498) (11,222) (1,143,703) (1,696,423)

At the end of the period 1,231,573 158,556 7,530,868 8,920,997

– IIIA-40 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Furniture, fixtures and Motor Plant and office vehicles machinery equipment Total RMB RMB RMB RMB

At 31 December 2011 Cost 4,529,114 – 3,646,960 8,176,074 Accumulated depreciation (1,128,922) – (481,534) (1,610,456)

3,400,192 – 3,165,426 6,565,618

At 31 December 2012 Cost 5,140,233 14,900 4,738,194 9,893,327 Accumulated depreciation (2,352,507) (118) (1,333,014) (3,685,639)

2,787,726 14,782 3,405,180 6,207,688

At 31 December 2013 Cost 7,805,835 154,924 10,024,892 17,985,651 Accumulated depreciation (4,093,251) (2,235) (2,652,643) (6,748,129)

3,712,584 152,689 7,372,249 11,237,522

At 31 December 2014 Cost 7,171,916 161,824 9,552,404 16,886,144 Accumulated depreciation (5,367,475) (16,626) (3,006,157) (8,390,258)

1,804,441 145,198 6,546,247 8,495,886

At 31 August 2015 Cost 6,544,515 186,404 11,611,300 18,342,219 Accumulated depreciation (5,312,942) (27,848) (4,080,432) (9,421,222)

1,231,573 158,556 7,530,868 8,920,997

14. GOODWILL

On 15 January 2015, the Target Group acquired 100% of the equity interest in Baishan Ground Business Management from 吉林省當代建築節能建材經銷有限公司 (Jilin Modern Construction and Green Material Retail Limited#) (“Jilin Modern Construction”) at a consideration of RMB500,000. Jilin Modern Construction was held by Ground Investment Holding as at 15 January 2015. Ground Investment Holding is held by Mr. Cui who is a close family member of Ms Cui.

31 August 2015 RMB

Cost and carrying amount: Acquisition of a subsidiary during the period and at 31 August 2015 4,999,430

– IIIA-41 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Goodwill is allocated to the Target Group’s cash-generating unit (“CGU”) identified according to the operating segment as follows:

31 August 2015 RMB

Property management 4,999,430

The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using an estimated weighted average growth rate of 5%. The growth rates used do not exceed the long-term average growth rates for the business in which the CGU operates. The cash flows are discounted using a discount rate of 10%. The discount rate used is pre-tax and reflects specific risks relating to the relevant segment.

Based on the value-in-use calculation, the recoverable amount exceeds the carrying amount of goodwill. No impairment loss is made.

15. PROPERTIES UNDER DEVELOPMENT AND COMPLETED PROPERTIES HELD FOR SALE

As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Properties under development (a) 1,234,195,951 685,958,203 1,961,383,990 2,296,136,360 Completed properties held for sale (b) 101,846,385 853,011,939 957,110,896 591,978,714

1,336,042,336 1,538,970,142 2,918,494,886 2,888,115,074

(a) The properties under development include costs of acquiring rights to use lands, which are located in the PRC for property development. Land use rights are held on leases of between 40 and 70 years.

The amount of properties under development expected to be recovered after more than one year is RMB116,100,028, RMB272,848,759, RMB1,382,701,685 and RMB1,384,231,173 as at 31 December 2012, 2013, 2014 and 31 August 2015 respectively.

(b) All completed properties held for sale are located in the PRC and are stated at the lower of cost or net realisable value.

(c) As at 31 December 2012, 2013, 2014 and 31 August 2015, certain of the Target Group’s properties under development with an aggregate carrying value of RMB452,935,245, RMB342,075,951, RMB342,075,951 and RMB342,075,951 were pledged to secure banking facilities granted to the Target Group.

– IIIA-42 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

16. OTHER RECEIVABLES

The Target Group As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Deposits for properties development 48,523,634 103,970,142 43,811,994 48,234,790 Land development expenditure (a) 141,523,412 266,478,650 316,535,284 270,504,951 Prepaid land cost – – – 27,000,000 Prepaid business tax and other taxes 68,901,910 81,352,235 94,454,478 60,825,751 Prepayments and other receivables 27,708,665 102,740,991 52,934,155 62,967,322 Other deposits 138,236 9,360,400 9,651,400 12,406,200 Amount due from related companies (b) 490,159,165 623,325,165 741,523,115 156,687,966 Amount due from immediate holding company (c) – – 6 60,886 Amount due from a fellow subsidiary (d) 72,270,000 – – –

849,225,022 1,187,227,583 1,258,910,432 638,687,866

The Target As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Amount due from immediate holding company (c) – – 6 60,886

– IIIA-43 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(a) The balances represented the monies advanced to the local government for land development works at a site. The Target Group will be reimbursed for the amount advanced to the local government in carrying out the land development irrespective of whether the Target Group will obtain the land use rights of the land in the future.

The amounts to be recovered after more than one year is RMB141,523,412, RMB266,478,650, RMB270,504,951 and RMB270,504,951 as at 31 December 2012, 2013, 2014 and 31 August 2015 respectively.

(b) As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Ground Investment Holding – – – 153,327,966 Jilin Guangze Group 482,489,165 609,505,165 727,703,115 – 吉林市廣澤乳品有限公司 (Jilin Guangze Dairy Products Company Limited*) (Jilin Guangze Dairy Products) 7,670,000 13,820,000 13,820,000 3,360,000

490,159,165 623,325,165 741,523,115 156,687,966

Ground Investment Holding was the immediate holding company of Ground Real Estate Group before the Ground Real Estate Acquisition. It is controlled by Mr. Cui and is a related company as Mr. Cui is a close family member of Ms. Cui. The amount is unsecured, interest-free and has no fixed repayment term.

Jilin Guangze Group and Jilin Guangze Dairy Products are controlled by Mr. Cui and are related companies as Mr. Cui is a close family member of Ms. Cui. The amounts are unsecured, interest-free and have no fixed repayment term.

(d) As at As at 31 December 30 August 2012 2013 2014 2015 RMB RMB RMB RMB

Fusong Ground 72,270,000 – – –

Fusong Ground was a fellow subsidiary of the Target Group in 2012 and 2013. In 2014, Fusong Ground became a subsidiary of Ground Real Estate after the business combination became effective as at 1 January 2014, of which the assets and liabilities and results were consolidated into the Target Group. The amount was unsecured, interest-free and repayable on demand.

– IIIA-44 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

17. CASH AND BANK BALANCES

The Target Group As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Cash and cash equivalents (as stated in consolidated statements of cash flows) 240,841,599 96,872,090 13,602,847 137,907,566 Restricted bank deposits (a) 13,491,288 375,304,556 94,373,879 7,159,928

Total cash and bank balances 254,332,887 472,176,646 107,976,726 145,067,494

The Target As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Cash at bank – – 55,524 53,084

(a) In accordance with relevant documents issued by the PRC local State-Owned Land and Resource Bureau, the Target Group is required to place certain of the proceeds received from pre-sale of properties as guarantee deposits for construction of the properties. The restriction will be released upon the construction is completed. Restricted cash earns interest at floating daily bank deposit rates.

– IIIA-45 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

18. TRADE AND OTHER PAYABLES

The Target Group As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Trade payables To third parties (a) 183,293,996 166,335,329 401,683,222 541,303,663

Other payables Deposits received 234,062 1,974,309 5,553,920 10,965,535 Due to Jilin Ground Equity (b) 159,500,000 134,500,000 124,500,000 140,500,000 Due to related companies (c) 143,376,000 214,596,000 653,796,387 400,945,426 Deposit received from government (d) 148,626,315 98,053,172 96,758,703 107,736,605 Interest payable (b) – – – 9,084,384 Receipt in advance from management services 1,290,031 5,514,115 4,799,515 7,222,062 Other payables 16,605,304 123,225,608 38,639,008 50,621,247

469,631,712 577,863,204 924,047,533 727,075,259

652,925,708 744,198,533 1,325,730,755 1,268,378,922

The Target As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Other payables Due to related companies (c) – – 55,524 57,799 Due to a subsidiary (e) ––11

– – 55,525 57,800

(a) The ageing analysis of trade payables of the Target Group presented based on invoice date at the end of the reporting periods as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Trade payables Within 365 days 182,651,045 102,508,743 305,998,008 508,887,800 Over 365 days 642,951 63,826,586 95,685,214 32,415,863

183,293,996 166,335,329 401,683,222 541,303,663

– IIIA-46 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(b) The amount due to Jilin Ground Equity, the non-controlling equity holder of certain subsidiaries in 2012, 2013 and 2014, is unsecured, interest-free and repayable on demand. In 2015, Jilin Ground Equity disposed of the entire interest of certain subsidiaries and is reclassified as a related party of Ground Real Estate as Ms. Cui and Mr. Cui are the general partners of this limited partnership.

Pursuant to the repayment agreement between Jilin Ground Equity and the Target Group dated 5 May 2015, the amounts become interest bearing at 20% per annum effective from 6 May 2015 and have to be repaid before 5 May 2017. The relevant interest expenses for the period ended 31 August 2015 are approximately of RMB9,084,000 .

Due to related companies Ground Investment Holding (i) 143,376,000 195,330,000 598,712,373 340,000,000 Jilin Guangze Group (ii) – 19,266,000 50,000,000 – Jilin Dongxiu (ii) – – – 30,000,000 Changchun Dongxiu (ii) – – – 30,000,000 Baishan Ground Business Management (iii) – – 4,969,000 – Charm Success Group Limited (iv) – – 103,116 933,041 East Gain Secretarial Services Limited (iv) – – 11,898 12,385

143,376,000 214,596,000 653,796,387 400,945,426

The Target As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Due to related companies Charm Success Group Limited (iv) – – 47,592 49,542 East Gain Secretarial Services Limited (iv) – – 7,932 8,257

– – 55,524 57,799

(i) Ground Investment Holding was the immediate holding company of Ground Real Estate Group before the Ground Real Estate Acquisition. It is controlled by Mr. Cui and is a related company as Mr. Cui is a close family member of Ms. Cui. The amount is unsecured, interest-free and has no fixed repayment term.

(ii) Jilin Guangze Group, Jilin Dongxiu and Changchun Dongxiu are controlled by Mr. Cui and are related companies as Mr. Cui is a close family member of Ms. Cui. The amounts are unsecured, interest-free and have no fixed repayment term.

– IIIA-47 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(iii) Baishan Ground Business Management was controlled by Mr. Cui and was a related company as Mr. Cui is a close family member of Ms. Cui. On 15 January 2015, the Target Group acquired Baishan Ground Business Management when has since become a wholly owned subsidiary as set out in note 27 (a).

(iv) Charm Success Group Limited and East Gain Secretarial Services Limited are related companies as they are controlled by Ms. Cui. The amounts are unsecured, interest-free and have no fixed repayment term.

(d) The amount represented the deposits received from government as the Target Group is responsible for the construction of commodity housing which includes but is not limited to the removal of the existing buildings situated on the land, the provision of infrastructure systems including roads, drainage system, water, gas and electricity supply and the construction of public facilities.

(e) The amount due to Xin Rui was unsecured, interest-free and has no fixed repayment term.

19. DEPOSITS FROM SALE OF PROPERTIES

Deposits from sale of properties in the amount of RMB276,749,614, RMB640,024,191, RMB168,421,128 and RMB171,924,512 as at 31 December 2012, 2013, 2014 and 31 August 2015 respectively are expected to be recognised as income in profit or loss after more than one year.

20. DEFERRED INCOME

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

At the beginning of the year/period – 2,210,000 30,502,000 56,045,000 Additions during the year/period 2,210,000 28,292,000 25,543,000 – Recognised as income during the year/period (Note 3) – – – (21,493,196)

At the end of the year/period 2,210,000 30,502,000 56,045,000 34,551,804

Non-current portion 2,210,000 30,502,000 1,040,000 1,040,000 Current portion – – 55,005,000 33,511,804

2,210,000 30,502,000 56,045,000 34,551,804

Deferred income represents government grants received by the Target Group as financial subsidies for the contribution to the development of infrastructure in Baishan, Jilin Province, which are to be recognised as income over the periods necessary to match the grants on a systematic basis to the costs that they are intended to compensate.

– IIIA-48 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

21. INTEREST-BEARING BORROWINGS

As at As at 31 December 31 August 2012 2013 2014 2015 Note RMB RMB RMB RMB

Interest-bearing borrowings Secured Bank borrowings (a) 300,000,000 600,000,000 514,200,000 430,000,000 Other borrowings (b) – – – 300,000,000

Unsecured Bank borrowings (d) – – – 40,000,000 Other borrowings (e) – 12,400,000 12,400,000 12,400,000

– 12,400,000 12,400,000 52,400,000

300,000,000 612,400,000 526,600,000 782,400,000

Amount repayable: Within one year – 60,000,000 220,000,000 532,400,000 In the second year – 220,000,000 306,600,000 200,000,000 In the third to fifth years, inclusive 300,000,000 332,400,000 – 50,000,000

300,000,000 612,400,000 526,600,000 782,400,000 Portion classified as current liabilities – (60,000,000) (220,000,000) (532,400,000)

Non-current portion 300,000,000 552,400,000 306,600,000 250,000,000

The weighted average effective interest rate on the interest-bearing borrowing for the years ended 31 December 2012, 2013, 2014 and the eight months ended 31 August 2015 are 14.29%, 9.61%, 9.67% and 9.11% per annum respectively.

(a) The secured bank loans bear interest at the prevailing rate as promulgated by the People’s Bank of China plus 0.5% per annum.

(b) On 17 July 2015, the Target Group borrowed a lump sum of RMB300,000,000 from 吉林省信託有限責任公司. The loan is secured by two parcels of land in Fusong and bears interest at a fixed rate of 11% per annum.

(c) At 31 December 2012, 2013, 2014 and 31 August 2015, the interest-bearing borrowings are secured by pledge of the properties under development and investment properties with the carrying value of approximately RMB649,935,245, RMB684,075,951, RMB981,075,951 and RMB1,002,075,951.

In addition, the interest-bearing borrowings are guaranteed by certain related parties in the form of corporate and/or personal guarantees for the years ended 31 December 2012, 2013 and 2014 and these guarantees have been released by the banks during the eight months ended 31 August 2015.

– IIIA-49 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(d) The unsecured bank loan bears interest at the prevailing rate as promulgated by the People’s Bank of China plus 0.6% per annum.

(e) On 27 May 2013, the Target Group borrowed a lump sum of RMB12,400,000 from 吉林市聯創小額貸款股份有限公司 and Mr. Cui is one of the equity holders of 吉林市聯創小額貸款股份有限公司. The unsecured loan bears interest at a fixed rate of 10% per annum. In 2013, 吉林市聯創小額貸款股份有限公司 was a related company of the Target Group with common equity holder, Mr. Cui. Since 1 January 2014, Ms. Cui became the ultimate controlling equity holder of Ground Real Estate. As Mr. Cui is the equity holder of 吉林市聯創小額貸款股份有限公司, 吉林市聯創小額貸款股份有限公司 remained as a related company as Mr. Cui is a close family member of Ms. Cui. Borrowing costs of RMB716,158, RMB1,240,000, RMB416,623 and RMB416,611 were paid for the above borrowing during the years ended 31 December 2013, 31 December 2014 and eight months period ended 31 August 2015 and 31 August 2014 respectively.

22. SHARE CAPITAL AND RESERVES

(a) Share Capital

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Authorised 50,000 ordinary shares of US$1 each – – 300,000 300,000

Issued and fully paid At beginning of the year/period –––6 New shares issued – – 6 60,880

At end of the reporting period – – 6 60,886

The Target was incorporated in the BVI with limited liability on 4 April 2014 with issued capital of US$1. On 6 May 2015, the issued share capital of the Target was increased to US$10,000 by allotting 9,999 ordinary shares of US$1 each. Subsequent to 31 August 2015, one additional share of US$1 has been issued to its shareholder to capitalise a shareholder loan of RMB400 million.

(b) Reserves

Statutory reserves

Pursuant to the relevant rules and regulation concerning enterprises established in the PRC and the articles of association of Ground Real Estate and its subsidiaries, they are required to transfer an amount of their profit after taxation to the statutory reserve fund, until the accumulated total of the fund reaches 50% of their registered capital. The statutory reserve fund may be distributed to equity holders in form of bonus issue.

Merger reserves

The merger reserve arises as a result of the (i) combination of the paid-up capital of Ground Real Estate, (ii) the Ground Real Estate Acquisition for the equity interest in Ground Real Estate and (iii) the use of the principles of merger accounting to account for the business combination under common control of 65% of the equity interest in Jilin Ground Tourism Investment as set out in note 26.

– IIIA-50 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Ground Real Estate was incorporated in the PRC with limited liability on 26 November 2010 with registered capital of RMB100,000,000. On 9 June 2011 and 19 June 2012, the registered and paid-up capital were increased to RMB110,000,000 and RMB200,000,000 respectively. On 30 April 2015 and 11 May 2015, the registered and paid-up capital were increased to RMB300,000,000 and RMB400,000,000 respectively. After the Ground Real Estate Acquisition on 14 May 2015, the Target became the holding company of Ground Real Estate as set out in the “Basis of presentation”. The distribution upon the Ground Real Estate Acquisition represented the consideration of RMB400,000,000 for the Ground Real Estate Acquisition.

23. ACCUMULATED LOSSES OF THE TARGET

RMB

At 4 April 2014 (date of incorporation) – Profit for the period and total comprehensive income for the period –

At 31 December 2014 –

At 1 January 2015 – Loss for the period and total comprehensive income for the period (4,715)

At 31 August 2015 (4,715)

24. CASH GENERATED FROM (USED IN) OPERATIONS

Eight months ended Year ended 31 December 31 August 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Profit before tax 201,120,829 120,769,899 257,352,397 231,005,545 301,583,326 Depreciation 2,075,183 3,062,490 3,698,409 1,870,377 1,696,423 Loss (gain) on disposal of property, plant and equipment – – 68,489 – (457,606) Interest income (665,616) (2,002,795) (727,709) (421,567) (163,658) Interest expenses 1,979,923 474,474 27,645,625 19,539,841 41,552,613 Changes in fair value of investment properties (123,176,063) (56,673,149) (151,948,204) (118,248,121) (17,731,608) Changes in working capital: Properties under development and completed properties held for sale (494,399,405) (159,109,056) (93,721,297) 109,240,794 33,192,072 Other receivables 47,851,912 (277,106,561) 46,583,007 88,670,298 41,167,149 Restricted bank deposits (2,001,461) (361,813,268) 280,930,677 357,741,459 87,213,951 Trade and other payables 327,886,279 45,052,825 (45,210,909) (172,503,863) 158,803,108 Deferred income 2,210,000 28,292,000 25,543,000 19,774,000 (21,493,196) Deposits from sale of properties 120,049,796 384,385,848 (149,995,806) (198,112,239) (628,711,244)

Cash generated from (used in) operations 82,931,377 (274,667,293) 200,217,679 338,556,524 (3,348,670)

– IIIA-51 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIA ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Major non-cash transactions

On 30 April 2015, the Target Group entered into agreements with Jilin Guangze Group and Ground Investment Holding, in respect of the offsetting of amount due from Jilin Guangze Group of RMB609,505,165 (note 16) with amount due to Jilin Guangze Group of RMB50,000,000 and amount due to Ground Investment Holding of RMB559,505,165 (note 18(c)).

25. DEFERRED TAXATION

The movement for the Relevant Periods in the Target Group’s net deferred tax asset (liability) was as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

At the beginning of the year/period 414,473 (27,200,774) (35,377,489) (262,115,143) Arising from common control combination (Note 26) – – (205,713,094) – Charged to profit or loss (Note 5) (27,615,247) (8,176,715) (21,024,560) (10,508,804)

At the end of the year/period (27,200,774) (35,377,489) (262,115,143) (272,623,947)

Recognised deferred tax assets and liabilities at the end of the Relevant Periods represent the following:

Assets As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Tax losses 3,593,242 9,584,814 26,780,696 20,704,794

Liabilities As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Fair value changes on investment properties (30,794,016) (44,962,303) (288,895,839) (293,328,741)

Unrecognised deferred tax assets arising from

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Tax losses 771,304 772,528 2,408,562 24,314,724

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The Target Group has not recognised deferred tax assets in respect of tax losses. The tax losses can be carried forward for five years from the year in which the losses arose for offsetting against future taxable income. The year of expiry for tax losses with no deferred tax assets being recognised at the end of the Relevant Periods is as follows:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Tax loss expiring in 2017 771,304 771,304 771,304 771,304 2018 – 1,224 1,224 1,224 2019 – – 1,636,034 1,636,034 2020 – – – 21,906,162

771,304 772,528 2,408,562 24,314,724

26. MERGER FOR COMMON CONTROL COMBINATION

On 25 February 2014, Ground Real Estate entered into an equity transfer agreement with Ground Investment Holding, pursuant to which Ground Real Estate agreed to acquire Ground Investment Holding’s entire equity interest, representing 65% of the equity interest, in Jilin Ground Tourism Investment at a consideration of RMB6,500,000. The remaining 35% equity interest of Jilin Ground Tourism Investment was held by Goodyear International Capital Limited, which is a wholly-owned subsidiary of Ground Properties Company Limited.

Pursuant to the Confirmatory Deed dated 10 December 2014, a group of companies (including Ground Investment Holding) that are ultimately and beneficially owned by Mr. Cui and Ms. Chai (the parents of Ms. Cui) transferred their 100% equity interest in Ground Real Estate and 65% equity interest in Jilin Ground Tourism Investment to Ms. Cui by way of a gift and nominee arrangement with effect from 1 January 2014. Since that date, Ms. Cui became the controlling party of Ground Real Estate and Jilin Ground Tourism Investment.

For the preparation of the Financial Information of the Target Group, the Fusong Acquisition constitutes a common control combination as Ground Real Estate and Jilin Ground Tourism Investment are under common control of Ms. Cui before and after the Fusong Acquisition. This common control combination has been accounted for using merger accounting with reference to the Accounting Guideline 5 “Merger Accounting For Common Control Combinations” issued by the HKICPA.

The results and the assets and liabilities of Jilin Ground Tourism Investment and its subsidiaries are included in the Financial Information of the Target Group effective from 1 January 2014 which is the date when the common control was established.

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The following summarises the consideration paid and the amounts of the assets combined and liabilities assumed, from the merger for common control combination at the date of combination:

RMB

Properties under development and completed properties held for sale 1,240,000,000 Cash and bank balances 4,699,902 Other receivables 67,900 Trade and other payables (197,542,738) Deferred tax assets 233,391 Deferred tax liabilities (205,946,485) Interest-bearing borrowing (250,000,000)

Total identifiable net assets acquired 591,511,970

Attributable to owners of Ground Real Estate (Merger Reserve) (380,257,780) Attributable to NCI (204,754,190)

Cash consideration paid 6,500,000

Cash consideration paid (6,500,000) Cash acquired 4,699,902

Net cash outflows in respect of the common control combination (1,800,098)

27. ACQUISITION AND DISPOSAL OF SUBSIDIARIES

(a) Acquisition of Baishan Ground Business Management

On 25 December 2014, the Target Group entered into an equity transfer agreement with Jilin Modern Construction to acquire 100% of the equity interest in Baishan Ground Business Management at a consideration of RMB500,000 which was completed on 15 January 2015. Jilin Modern Construction was held by Ground Investment Holding as at 15 January 2015. Ground Investment Holding is held by Mr. Cui who is a close family member of Ms. Cui.

The following summarises the consideration paid and the amounts of the assets acquired and liabilities assumed as well as the amount of goodwill arising from the acquisition recognised at the date of acquisition:

RMB

Cash and bank balances 1,393,354 Other receivables 5,718,852 Other payables (11,611,636)

Total identifiable net liabilities acquired (4,499,430) Goodwill arising on acquisition 4,999,430

Cash consideration paid 500,000

Cash consideration paid (500,000) Cash acquired 1,393,354

Net cash inflows from the acquisition of a subsidiary 893,354

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(b) Disposal and acquisition of Jilin Zhujia

On 8 May 2015, Ground Real Estate, a subsidiary of the Target, entered into a share transfer agreement with 吉林省廣澤旅遊投資有限公司 (Jilin Guangze Tourism Investment Co., Ltd#) (“Jilin Guangze Tourism Investment”) to transfer the entire equity interest in Jilin Zhujia for a consideration of RMB10,000,000. On 8 June 2015, Ground Real Estate entered into an equity transfer agreement with Jilin Guangze Tourism Investment to re-acquire the entire equity interest in Jilin Zhujia for a consideration of RMB10,000,000. Upon completion, Jilin Zhujia remained a wholly-owned subsidiary of the Target Group.

It was the management of the Target Group’s intention to dispose of entities within the Ground Real Estate Group that is expected to be of no future use to simplify the structure before the completion of the reorganisation of the Target Group. However, given that Jilin Zhujia was previously 40% held by minority equity holder and; there exists certain balance at the end of each reporting period, the management decided to re-acquire the entire equity interest in Jilin Zhujia and to have the balance settled prior to deregistration of Jilin Zhujia.

No gain on disposal or goodwill was recognised from the above disposal and acquisition transactions.

28. RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in this Financial Information, the Target Group entered into the following material related party transactions in the ordinary course of the business.

On 27 May 2013, 吉林省乳業集團有限公司 (Jilin Dairy Group Company Limited#) (Jilin Dairy Group) entered into a deed of guarantee to secure the obligations of the Target Group for the bank borrowing of RMB300,000,000. Jilin Dairy Group is a wholly owned subsidiary of Ground Investment Holding and was a fellow subsidiary of Ground Real Estate in 2012 and 2013. Since 1 January 2014, Ms. Cui has become the ultimate controlling equity holder of Ground Real Estate. As Mr. Cui is the equity holder of Ground Investment Holding, Jilin Dairy Group remained as a related company as Mr. Cui is a close member of the family of Ms. Cui. The guarantee from Jilin Dairy Group has been released by the bank during the eight months ended 31 August 2015.

29. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target Group has established policies and procedures for identifying, evaluation, monitoring and controlling various types of risks pertaining to the Target Group’s business. The management policies for the major types of risks are as follows:

Credit risk

As at 31 December 2012, 2013, 2014 and 31 August 2015, the Target Group’s maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties is the carrying amount of the respective recognised financial assets as stated in the statement of financial position. The Target Group’s credit risk is primarily attributable to other receivables.

In order to minimise the credit risk, the management has credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. The Target Group has retained the legal titles of the rental deposits received from the tenants before the full payment are settled. In this regard, the management considers that the Target Group’s credit risk is significantly reduced.

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circumstances, the Target Group is able to retain the properties’ titles and resell the property to recover any amounts paid by the Target Group to the bank. In this regard, the directors of the Target consider that the Target Group’s credit risk is significantly reduced.

Liquidity risk

The Target Group’s objective is to maintain a balance between continuity of funding and flexibility through the proceeds from pre-sale of properties and utilisation of borrowings. The maturity profile of the Target Group’s financial liabilities at the end of the reporting period based on contractual undiscounted payments are summarised below:

More than More than On demand one year but two years but Total or within less than less than undiscounted Carrying one year two years five years cash flow amount RMB RMB RMB RMB RMB

At 31 December 2012 Trade and other payables* 651,635,677 – – 651,635,677 651,635,677 Interest-bearing borrowings 27,675,000 27,675,000 302,028,329 357,378,329 300,000,000

679,310,677 27,675,000 302,028,329 1,009,014,006 951,635,677

At 31 December 2013 Trade and other payables* 738,684,418 – – 738,684,418 738,684,418 Interest-bearing borrowings 116,590,000 325,408,329 253,598,616 695,596,945 612,400,000

855,274,418 325,408,329 253,598,616 1,434,281,363 1,351,084,418

At 31 December 2014 Trade and other payables* 1,320,931,240 – – 1,320,931,240 1,320,931,240 Interest-bearing borrowings 519,608,329 33,598,616 – 553,206,945 526,600,000

1,840,539,569 33,598,616 – 1,874,138,185 1,847,531,240

At 31 August 2015 Trade and other payables* 1,261,156,860 – – 1,261,156,860 1,261,156,860 Interest-bearing borrowings 588,660,181 220,866,849 54,776,712 864,303,742 782,400,000

1,849,817,041 220,866,849 54,776,712 2,125,460,602 2,043,556,860

* Excluding receipt in advance from management services.

The amounts have not included financial guarantee contracts in which the Target Group could be required to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty to the guarantee for loans procured by the purchasers of the Target Group’s properties (Note 32). Such guarantees terminate upon the earlier of (i) issuance of the real estate ownership certificate which will generally be available within an average period of two to three years upon the completion of guarantee registration; or (ii) the satisfaction of mortgaged loan by the purchasers of properties.

Based on expectations at the end of the reporting period, the Target Group considers that it is more likely than not that no amount will be payable under the arrangement.

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Interest rate risk

The Target Group’s exposure to the cash flow interest rate risk relates primarily to the variable-rate bank borrowings. It is the Target Group’s policy to negotiate the terms of the interest-bearing bank borrowings in order to balance the interest rate exposure. The sensitivity analyses below have been determined based on the exposure to interest rates for bank borrowings at the end of the reporting period. No sensitivity analysis has been presented for the exposure to interest rates for bank balances as the management of the Target Group considers that, taking into account that the fluctuation in interest rates on bank balances and deposits with a nonbanking financial institution is minimal, the impact of profit or loss for the respective years is insignificant.

The analysis is prepared assuming the variable-rate bank borrowings outstanding at the end of the reporting period were outstanding for the whole year. A 50 basis points increase or decrease during the Relevant Periods is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates. If interest rates had been 50 basis points higher/lower during the Relevant Periods and all other variables were held constant, the Target Group’s net profit would decrease/increase by RMB456,671, RMB1,402,234, RMB4,187,325 and RMB3,792,164 for the years ended as at 31 December 2012, 2013, 2014 and the eight months ended as at 31 August 2015 respectively.

Fair value

The carrying amount of the Target Group’s financial assets, including other receivables and financial liabilities, including trade and other payables and interest-bearing borrowings are approximate their fair values.

30. CAPITAL MANAGEMENT

The objectives of the Target Group’s capital management are to safeguard the Target Group’s ability to continue as a going concern and to provide returns for its owners. The Target Group manages its capital structure and makes adjustments, including payment of dividend to its owners, return capital to its owners or issue new capital or sell assets to reduce debts. No changes were made in the objectives, policies or processes during the Relevant Periods.

31. FAIR VALUE MEASUREMENTS

The following presents the assets and liabilities measured at fair value or required to disclose their fair value in the Financial Information on a recurring basis at 31 December 2012, 2013, 2014 and 31 August 2015 across the three levels of the fair value hierarchy defined in HKFRS 13, Fair Value Measurement, with the fair value measurement categorised in its entirety based on the lowest level input that is significant to the entire measurement. The levels of inputs are defined as follows:

• Level 1 (highest level): quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

• Level 3 (lowest level): unobservable inputs for the asset or liability.

The Target Group’s investment properties of RMB197,000,000, RMB342,000,000 and RMB639,000,000 and RMB660,000,000 as at 31 December 2012, 2013, 2014 and 31 August 2015 respectively are measured at Level 3 of the fair value hierarchy.

During the Relevant Periods, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

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Valuation Processes of the Group

As described in note 12, at the end of the reporting period, the investment properties were revalued by Savills Valuation and Professional Services Limited, an independent professional qualified valuer, on the open market value basis using direct comparison approach. The most significant input into this valuation approach is comparable sales transactions as available in the relevant markets and the costs that will be expended to complete the developments.

Quantitative information of the significant unobservable inputs and description of valuation techniques used in Level 3 fair value measurement

The quantitative information of the significant unobservable input and description of valuation techniques used in Level 3 fair value measurement, including the description of the sensitivity to changes in unobservable inputs for recurring Level 3 fair value measurements, are as follows:

TO BE CONFIRMED BY VALUERS

Valuation Range (weighted Description Fair value techniques Unobservable input average, if applicable) (RMB)

As at 31 December 2012 Investment properties 197,000,000 Comparison (a) Comparable (a) RMB11,800/sq.m. under development method* market prices

As at 31 December 2013 Investment properties 342,000,000 Comparison (a) Comparable (a) RMB12,200/sq.m. under development method* market prices

As at 31 December 2014 Completed investment 639,000,000 Income (a) Average (a) RMB81/sq.m. properties approach monthly unit rent (b) Capitalisation (b) 5.25% rate

As at 31 August 2015 Completed investment 660,000,000 Income (a) Average (a) RMB83/sq.m. properties approach monthly unit rent (b) Capitalisation (b) 5.25% rate

* In undertaking the valuation, the valuer has also taken into account the costs that will be expended to complete the property.

Sensitivity of fair value to changes in unobservable inputs:

• Assuming other factors remain unchanged, the higher the market prices, the higher the fair value;

• Assuming other factors remain unchanged, the higher the monthly unit rent, the higher the fair value;

• Assuming other factors remain unchanged, the higher the capitalisation rate, the lower the fair value.

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32. CONTINGENT LIABILITIES

The Target Group has arranged bank financing for certain purchasers of the Target Group’s property units and provided guarantees to secure obligations of such purchasers for repayments. As at 31 December 2012, 2013, 2014 and 31 August 2015, guarantees amounting to RMB6,044,623, RMB13,966,184, RMB12,456,140 and RMB5,203,120 are given to banks with respect to loans procured by purchasers of the Target Group’s properties respectively. Such guarantees terminate upon the earlier of (i) issuance of the real estate ownership certificate to the purchasers or (ii) the satisfaction of mortgaged loan by the purchasers of properties.

Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Target Group is responsible to repay the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks and the Target Group is entitled to take over the legal title and possession of the related properties. The Target Group’s guarantee period starts from the dates of grant of the mortgages. During the Relevant Periods, the Target Group did not incur any material losses in respect of any of these guarantees. The directors consider that the likelihood of default in payments by purchasers is minimal and therefore the financial guarantee measured at fair value is immaterial. Also, in case of default on payments, the net realisable value of the related property units would be sufficient to repay the outstanding mortgages loans together with any accrued interest and penalty, and therefore no provision has been made in connection with the guarantees.

33. OPERATING LEASE COMMITMENTS

As lessor

At the end of the Relevant Periods, the Target Group had future minimum rental receivables under non-cancellable operating leases which fall due:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Within one year – – 3,732,933 14,124,667 In the second to fifth years inclusive – – 3,764,933 30,095,162 After five years – – 467,729 75,274,652

– – 7,965,595 119,494,481

As lessees

At the end of the Relevant Periods, the Target Group had future minimum rental payments under non-cancellable operating leases which fall due:

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Within one year – – – 25,505,995 In the second to fifth years inclusive – – – 102,023,960 After five years – – – 10,132,533

– – – 137,662,488

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34. OTHER COMMITMENTS

As at As at 31 December 31 August 2012 2013 2014 2015 RMB RMB RMB RMB

Expenditure in respect of the properties development contracted but not provided 1,023,490,693 951,899,354 942,493,513 971,164,321

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Target Group in respect of any period subsequent to 31 August 2015.

# denotes an English translation of the Chinese name and is for identification purposes only. If there is any inconsistency between the Chinese name and the English translation, the Chinese name shall prevail.

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The following is the text of a report prepared for the purpose of the circular issued by the Company on 28 December 2015 received from the reporting accountants, Mazars CPA Limited, Certified Public Accountants, Hong Kong.

To the Board of Directors Ground Properties Company Limited

Dear Sirs,

We set out below our report on the financial information regarding 吉林市萬升房地產開發有限公司 (Jilin Wan Sheng Property Development Company Limited#) (the “Target”), comprising the statements of financial position of the Target as at 31 December 2012, 31 December 2013, 31 December 2014 and 30 June 2015, and the statements of comprehensive income, statements of cash flows and statements of changes in equity of the Target for the years ended 31 December 2012, 31 December 2013 and 31 December 2014 and six months ended 30 June 2015 (the “Relevant Periods”), together with the notes thereto (the “Financial Information”), and the statement of comprehensive income, statement of cash flows and statement of changes in equity of the Target for the six months ended 30 June 2014 together with the notes thereto (the “Corresponding Financial Information”) for inclusion in a circular issued by Ground Properties Company Limited (“Ground Properties”) dated 28 December 2015 (the “Circular”) in connection with the major transaction in respect of the proposed acquisition of the entire registered capital of the Target (the “Proposed Acquisition”).

The Target was established in the People’s Republic of China (the “PRC”) with limited liability on 19 November 2009 and is engaged in property development in the PRC.

The Target has adopted 31 December as its financial year end date. As at the date of this report, no audited financial statements have been prepared for the Target.

For the purpose of this report, the directors of the Target have prepared the financial statements of the Target for the Relevant Periods (the “Underlying Financial Statements”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The Underlying Financial Statements for the Relevant Periods were audited by us in accordance with Hong Kong Standards on Auditing issued by the HKICPA.

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Directors’ responsibility for the Financial Information

The directors of the Target are responsible for the preparation and true and fair presentation of the Financial Information in accordance with the basis set out in Section B below and the applicable disclosure provisions of the Listing Rules, and for such internal control as the directors of the Target determine is necessary to enable the preparation of the Financial Information that is free from material misstatement, whether due to fraud or error.

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Financial Information based on our procedures performed in accordance with Auditing Guideline No. 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA. We have not audited any financial statements of the Target in respect of any period subsequent to 30 June 2015.

Basis for qualified opinion

(a) Other receivables as at 1 January 2012 and 31 December 2012

Included in “Other receivables” on the statement of financial position as at 1 January 2012 and 31 December 2012 were balances principally due from certain former key management personnel of the Target of approximately RMB31 million and RMB61 million respectively. We have not been able to obtain sufficient appropriate audit evidence to substantiate the nature of these balances. There were no other practicable alternative procedures that we could adopt to verify the balances in question. Accordingly, we were unable to satisfy ourselves as to the existence, completeness and valuation of the balances, the appropriateness of the classification of the balances and the appropriateness and adequacy of the related disclosures. We were unable to determine whether any adjustments were necessary in respect of the amounts which might have a consequential significant effect on the Target’s state of affairs as at 1 January 2012 and 31 December 2012 and its loss for the year ended 31 December 2012.

(b) Write off of other receivables for the year ended 31 December 2013

As mentioned in note 12(d) to the Financial Information, amounts due from certain former key management personnel which are included in “Other receivables” amounting to RMB71 million have been written off in 2013 as the management of the Target considered such amounts would not be recoverable following the departure of these key management personnel. The amount written off has been included in “Other operating expenses” on the statement of comprehensive income for the year ended 31 December 2013.

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As described in part (a) above, we have not been able to obtain sufficient appropriate audit evidence to substantiate the nature of the balances brought forward from 2012 of RMB61 million. In addition, we have not been able to obtain sufficient appropriate audit evidence to substantiate the nature of the incremental amounts building up to RMB71 million during 2013 prior to the write off. There were no other practicable alternative procedures that we could adopt to verify the balances in question. Accordingly, we were unable to conclude the appropriateness of the write off on the statement of comprehensive income and the appropriateness and adequacy of the related disclosures.

Qualified opinion

In our opinion, except for the possible effects of the matters described in the basis for qualified opinion section, the Financial Information gives a true and fair view of the state of affairs of the Target as at 31 December 2012 and 31 December 2013, and of the Target’s losses and cash flows for the years ended 31 December 2012 and 31 December 2013.

In our opinion, the Financial Information gives a true and fair view of the state of affairs of the Target as at 31 December 2014 and 30 June 2015, and of the Target’s results and cash flows for the year ended 31 December 2014 and six months ended 30 June 2015.

Corresponding Financial Information

For the purpose of this report, we have also reviewed the unaudited Corresponding Financial Information of the Target, for which the directors of the Target are responsible, in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA.

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Mazars CPA Limited Certified Public Accountants Hong Kong, 28 December 2015

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A. FINANCIAL INFORMATION

Statements of Comprehensive Income

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 Note RMB RMB RMB RMB RMB (unaudited)

Turnover 2 – 40,828,089 38,204,209 8,844,690 213,436,753 Cost of sales – (38,663,236) (32,663,247) (7,773,166) (193,097,806)

Gross profit – 2,164,853 5,540,962 1,071,524 20,338,947 Other revenue and other income 3 – 347,404 76,836 3,940 82,748 Selling expenses (1,306,675) (317,360) (4,559,815) (1,547,829) (704,369) Administrative expenses (2,982,578) (2,536,964) (8,307,790) (3,421,151) (3,751,554) Other operating expenses (969,310) (75,117,983) (2,719,013) (13,385) (302,678) Finance costs 4 (8,935,701) (28,362) (86,787) (39,916) (19,522)

(Loss) profit before tax 4 (14,194,264) (75,488,412) (10,055,607) (3,946,817) 15,643,572 Income tax credit (expense) 5 – 1,119,800 2,513,902 986,704 (3,633,702)

(Loss) profit for the year/period and total comprehensive income for the year/period (14,194,264) (74,368,612) (7,541,705) (2,960,113) 12,009,870

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Statements of Financial Position

As at 31 December As at 2012 2013 2014 30 June 2015 Note RMB RMB RMB RMB

Non-current asset Property, plant and equipment 10 530,412 146,388 62,644 37,475 Deferred tax assets 19 – 1,119,800 3,633,702 –

530,412 1,266,188 3,696,346 37,475

Current assets Properties under development and completed properties held for sale 11 246,748,033 273,638,908 326,633,609 173,746,079 Trade and other receivables 12 125,310,571 61,637,246 63,176,168 142,815,262 Prepaid income tax 2,073,856 3,286,996 4,258,140 5,829,669 Cash and bank balances 13 4,006,163 5,746,772 82,155,801 5,270,434

378,138,623 344,309,922 476,223,718 327,661,444

Current liabilities Trade and other payables 14 75,572,229 146,951,952 79,723,493 84,262,465 Deposits from sale of properties 15 144,276,377 175,306,375 248,808,598 84,629,824 Interest-bearing borrowings 16 132,441,135 71,307,101 206,918,996 202,327,783

352,289,741 393,565,428 535,451,087 371,220,072

Net current assets (liabilities) 25,848,882 (49,255,506) (59,227,369) (43,558,628)

NET ASSETS (LIABILITIES) 26,379,294 (47,989,318) (55,531,023) (43,521,153)

Capital and reserves Paid-up capital 17 50,000,000 50,000,000 50,000,000 50,000,000 Accumulated losses (23,620,706) (97,989,318) (105,531,023) (93,521,153)

TOTAL EQUITY (DEFICITS) 26,379,294 (47,989,318) (55,531,023) (43,521,153)

– IIIB-6 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Statements of Changes in Equity

Paid-up Accumulated capital losses Total RMB RMB RMB

At 1 January 2012 50,000,000 (9,426,442) 40,573,558

Loss for the year and total comprehensive income for the year – (14,194,264) (14,194,264)

At 31 December 2012 50,000,000 (23,620,706) 26,379,294

At 1 January 2013 50,000,000 (23,620,706) 26,379,294

Loss for the year and total comprehensive income for the year – (74,368,612) (74,368,612)

At 31 December 2013 50,000,000 (97,989,318) (47,989,318)

At 1 January 2014 50,000,000 (97,989,318) (47,989,318)

Loss for the year and total comprehensive income for the year – (7,541,705) (7,541,705)

At 31 December 2014 50,000,000 (105,531,023) (55,531,023)

At 1 January 2015 50,000,000 (105,531,023) (55,531,023)

Profit for the period and total comprehensive income for the period – 12,009,870 12,009,870

At 30 June 2015 50,000,000 (93,521,153) (43,521,153)

(unaudited) At 1 January 2014 50,000,000 (99,109,118) (49,109,118)

Loss for the period and total comprehensive income for the period – (2,960,113) (2,960,113)

At 30 June 2014 50,000,000 (102,069,231) (52,069,231)

– IIIB-7 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Statements of Cash Flows

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 Note RMB RMB RMB RMB RMB (unaudited)

OPERATING ACTIVITIES Cash (used in) generated from operations 18 (124,020,378) 64,659,948 (126,358,281) 9,842,691 12,698,905 Interest paid (11,823,273) (4,217,148) (6,499,344) (2,023,213) (7,294,466) PRC land appreciation tax paid (800,148) (1,213,140) (971,144) (375,583) (1,571,529)

Net cash (used in) generated from operating activities (136,643,799) 59,229,660 (133,828,769) 7,443,895 3,832,910

INVESTING ACTIVITIES Interest received – 7,404 40,012 3,940 70,741 Proceeds from disposal of property, plant and equipment – 180,000 – – – Payment for purchases of property, plant and equipment (14,858) ––––

Net cash (used in) generated from investing activities (14,858) 187,404 40,012 3,940 70,741

FINANCING ACTIVITIES New borrowings 132,441,135 – 143,900,000 – – Repayment of borrowings – (61,134,034) (8,288,105) (7,000,000) (4,591,213)

Net cash generated from (used in) financing activities 132,441,135 (61,134,034) 135,611,895 (7,000,000) (4,591,213)

Net (decrease) increase in cash and cash equivalents (4,217,522) (1,716,970) 1,823,138 447,835 (687,562)

Cash and cash equivalents at beginning of the year/period 6,089,957 1,872,435 155,465 155,465 1,978,603

Cash and cash equivalents at end of the year/period 13 1,872,435 155,465 1,978,603 603,300 1,291,041

– IIIB-8 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

B. NOTES TO THE FINANCIAL INFORMATION

Corporate Information

The Target is a limited liability company established in the People’s Republic of China (“PRC”) on 19 November 2009. The Target’s registered office is located at 23 Junmin, Road, Chuanying District in Jilin City, Jilin Province#. The principal activity of the Target is property development.

1. PRINCIPAL ACCOUNTING POLICIES

Statement of compliance

The Financial Information has been prepared in accordance with HKFRSs, which collective term includes all applicable individual HKFRSs, Hong Kong Accounting Standards (“HKAS”) and Interpretations issued by the HKICPA and accounting principles generally accepted in Hong Kong.

The Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The HKICPA has issued a number of new and revised HKFRSs during the Relevant Periods. For the purpose of preparing the Financial Information, the Target has consistently adopted all these HKFRSs that are relevant to its operations and are effective for the Relevant Periods.

Going concern

At 31 December 2013, 31 December 2014 and 30 June 2015, the Target had net liabilities of RMB47,989,318, RMB55,531,023 and RMB43,521,153 respectively. Subsequent to 30 June 2015, the registered and paid-up capital of the Target was increased to RMB200,000,000 in order to provide further capital base to the Target. In the opinion of the directors of the Target, in light of the measures taken to date, together with other measures in progress, the Target will have sufficient working capital for its current requirements and it is reasonable to expect the Target to return to a financially viable going concern. Accordingly, the directors of the Target are satisfied that it is appropriate to prepare the Financial Information on a going concern basis, notwithstanding the Target’s financial and liquidity position during the Relevant Periods.

Basis of measurement

The measurement basis used in the preparation of the Financial Information is the historical cost basis.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Repairs and maintenance are charged to the statement of comprehensive income during the period in which they are incurred.

Depreciation is provided to write off the cost less accumulated impairment losses of property, plant and equipment over their estimated useful lives from the date on which they are available for use and after taking into account their estimated residual values, using the straight-line method at the annual rate as set out below. Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis and depreciated separately:

Motor vehicles 25% Plant and machinery 10% Furniture, fixtures and office equipment 33%

– IIIB-9 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Properties under development

Completed properties held for sale

Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when and only when the Target becomes a party to the contractual provisions of the instruments and on a trade date basis.

A financial asset is derecognised when and only when (i) the Target’s contractual rights to future cash flows from the financial asset expire or (ii) the Target transfers the financial asset and either (a) the Target has transferred substantially all the risks and rewards of the financial asset or (b) the Target neither transfer nor retains substantially all the risks and rewards of ownership of the financial asset but it does not retain control of the financial asset.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the relevant contract is discharged, cancelled or expires.

Classification and measurement

1) Loans and receivables

Loans and receivables include trade and other receivables that are (i) non-derivative financial assets with fixed or determinable payments (ii) not quoted in an active market and (iii) not held for trading. They are measured at amortised cost using the effective interest method, except where receivables are interest-free loans and without any fixed repayment term or the effect of discounting would be insignificant. In such case, the receivables are stated at cost less impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition over the year to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in profit or loss.

2) Financial liabilities

The Target’s financial liabilities include trade and other payables and interest-bearing borrowings. All financial liabilities except for derivatives are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.

– IIIB-10 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Impairment of financial assets

At the end of each reporting period, the Target assesses whether there is objective evidence that financial assets, other than those at fair value through profit or loss, are impaired. The impairment loss of financial assets carried at amortised cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flow discounted at the financial asset’s original effective interest rate. Such impairment loss is reversed in subsequent periods through profit or loss when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment of non-financial assets

At the end of each reporting period, the Target reviews internal and external sources of information to determine whether there is any indication that its property, plant and equipment may be impaired or impairment loss previously recognised no longer exists or may be reduced. If any such indication exists, the recoverable amount of the asset is estimated, based on the higher of its fair value less costs of disposal and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the Target estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. cash-generating unit).

Cash equivalents

For the purpose of the statements of cash flows, cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, net of bank overdrafts.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Target and when the revenue and costs, if applicable can be measured reliably on the following bases:

Revenue from sales of properties is recognised when the risks and rewards of properties are transferred to the purchasers, which is when the construction of relevant properties has been completed and the properties have been delivered to the purchasers and collectability of related receivables is reasonably assured. To the extent that the Target has to perform further work on the properties already delivered to the purchasers, the relevant expenses shall be recognised simultaneously. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the “Deposits from sale of properties” under current liabilities.

Interest income from financial assets is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Borrowing costs

– IIIB-11 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income over the years necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Employee benefits

Short term employee benefits

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

Defined contribution plans

The employees of the Target in the PRC are members of the state-managed retirement benefits schemes operated by the government. The Target is required to contribute a specified percentage of their payroll costs to the retirement benefits schemes. The only obligation of the Target with respect to the retirement benefits schemes is to make the specified contributions.

Taxation

The charge for current income tax is based on the results for each reporting period as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Segment reporting

Operating segments, and the amounts of each segment item reported in the Financial Information, are identified from the financial information provided regularly to Target’s chief operating decision makers. The Target’s executive directors, who are responsible for allocating resources to, and assessing the performance of, the Target’s various lines of business, have been identified as the chief operating decision makers.

– IIIB-12 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Related parties

A related party is a person or entity that is related to the Target.

(a) A person or a close member of that person’s family is related to the Target if that person:

(i) has control or joint control over the Target;

(ii) has significant influence over the Target; or

(iii) is a member of the key management personnel of the Target.

(b) An entity is related to the Target if any of the following conditions applies:

(i) The entity and the Target are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Target or an entity related to the Target.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

(viii) The entity, or any of a group of which it is a part, provides key management personnel services to the Target or to its parent.

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

Critical accounting estimates and judgements

Estimates and assumptions concerning the future and judgements are made by the management in the preparation of the Financial Information. They affect the application of the Target’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Where appropriate, revisions to accounting estimates are recognised in the period of revision and future periods, in case the revision also affects future periods.

Allocation of construction cost on properties under development

When developing properties, the Target typically divides the development projects into phases. Costs directly related to the development of a phase are recorded as the cost of such phase. Costs that are common to several phases are allocated to each phase based on the saleable floor area of each phase as a percentage of the total saleable floor area of the entire project. The cost of the unit sold is determined by the floor area in square meters sold multiplied by the average cost per square meter of that particular phase of the project.

– IIIB-13 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

PRC land appreciation taxes

The Target is subject to land appreciation taxes in the PRC. However, the implementation and settlement of these taxes varies among various cities in the PRC, and the Target has not finalised its land appreciation taxes calculation and payments with any local tax authorities in the PRC. Accordingly, significant judgement is required in estimating the amount of the land appreciation taxes. The Target recognised these land appreciation taxes based on management’s best estimates according to the interpretation of the tax rules. The final tax liabilities could be different from the amounts that were initially recorded, and these differences will impact the income tax expense and tax provisions in the periods in which such taxes have been finalised with local tax authorities.

Write off of other receivables

If circumstances indicate that the carrying amount of other receivables may not be recoverable, the assets may be considered impaired and an impairment loss may be recognised. The carrying amounts of other receivables are reviewed by the management periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. The recoverable amount of other receivables is the estimated future cash flows discounted at the original effective interest rate. The Target uses all readily available information in determining an amount that is a reasonable approximation of the recoverable amount. Owing to inherent risk associated with estimations of the recoverable amount, the actual recoverable amount of the receivables may be different from the estimations and profit or loss could be affected by the accuracy of the estimations.

Future changes in HKFRSs

At the date of issue of the Financial Information, the HKICPA has issued a number of new/revised HKFRSs that are not yet effective for the Relevant Periods, which the Target has not early adopted. The management does not anticipate that the adoption of these new HKFRSs in future periods will have any material impact on the results of the Target.

2. TURNOVER AND SEGMENT INFORMATION

Business segments

The executive directors of the Target has been identified as the chief operating decision maker (“CODM”) of the Target who are responsible for reviewing the Target’s internal reporting in order to assess performance and allocate resources. The Target has only one business segment of property development in the PRC. Therefore, no business segment information is presented.

Geographical information

The Target’s operations are all located in the PRC. Accordingly, no geographical information on revenue from external customers and specified non-current assets is presented.

Information about major customers

No sales to a single customer or a group of customers under common control accounted for 10% or more of the Target’s revenue for the Relevant Periods and for the six months ended 30 June 2014.

– IIIB-14 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Turnover

Turnover during the Relevant Periods and the six months ended 30 June 2014 consists of sales of properties only which is as follows:

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Sales of properties – 40,828,089 38,204,209 8,844,690 213,436,753

3. OTHER REVENUE AND OTHER INCOME

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Other revenue Bank interest income – 7,404 40,012 3,940 70,741

Other income Government subsidy – 340,000 – – – Sundry income – – 36,824 – 12,007

– 340,000 36,824 – 12,007

– 347,404 76,836 3,940 82,748

4. (LOSS) PROFIT BEFORE TAX

This is stated after charging (crediting):

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Finance costs Interest on loans wholly repayable within five years 11,823,273 4,217,148 6,499,344 2,023,213 7,294,466 Less: Interest expense capitalised into properties under development (2,887,572) (4,188,786) (6,412,557) (1,983,297) (7,274,944)

8,935,701 28,362 86,787 39,916 19,522

Interest expense capitalised for the years ended 31 December 2012, 2013 and 2014 and the six months ended 30 June 2014 are calculated by applying a weighted average capitalisation rates ranging from 14.2% to 22.9% per annum in respect of expenditure on qualifying assets. Interest expenses capitalised for the six months ended 30 June 2015 are related to borrowing for specific property development projects.

– IIIB-15 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Other items Employee benefits expense (excluding directors’ emoluments) 2,094,346 1,147,059 12,427,776 4,844,370 3,673,204 Contributions to defined contribution plan 667,914 365,813 3,106,944 1,211,092 918,300

Total staff costs 2,762,260 1,512,872 15,534,720 6,055,462 4,591,504 Less: Amount capitalised into properties under development (1,644,841) (495,805) (5,479,211) (2,281,312) (2,025,870)

1,117,419 1,017,067 10,055,509 3,774,150 2,565,634

Depreciation 196,557 141,858 83,744 44,825 25,169 Write off of other receivables (Note 12 (d)) – 71,009,211 – – – Cost of properties sold – 38,663,236 32,663,247 7,773,166 193,097,806 Loss on disposal of property, plant and equipment – 62,166 – – –

5. INCOME TAX EXPENSE

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Deferred taxation

Benefit of tax losses (recognized)/reversed – (1,119,800) (2,513,902) (986,704) 3,633,702

PRC Enterprise Income Tax has not been provided for the Relevant Periods and the six months ended 30 June 2014 as the Target incurred a loss for taxation purpose or the estimated assessable profits are wholly absorbed by unrelieved tax losses brought forward from previous years.

PRC Land Appreciation Tax (“LAT”) is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds from sale of properties less deductible expenditures including land costs, borrowing costs and other property development expenditures. The Target has estimated for LAT according to the requirements set forth in the relevant PRC tax laws and regulations. The LAT provision is subject to the final review/approval by the local tax bureau. LAT has not been provided for the Relevant Periods and the six months ended 30 June 2014 as the Target did not have taxable gain after the deductible expenditures.

– IIIB-16 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Reconciliation of tax expense

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

(Loss) profit before tax (14,194,264) (75,488,412) (10,055,607) (3,946,817) 15,643,572

PRC Enterprise Income Tax at applicable tax rate of 25% (3,548,566) (18,872,103) (2,513,902) (986,704) 3,910,893 Tax effect of expenses not deductible for tax purpose 3,548,566 17,752,303 – – – Tax offset of income not taxable for tax purpose ––––(277,191)

Tax (credit) expense for the year/period – (1,119,800) (2,513,902) (986,704) 3,633,702

6. DIRECTORS’ EMOLUMENTS

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Directors’ emoluments Fees ––––– Other emoluments –––––

–––––

During the Relevant Periods and the six months ended 30 June 2014, no directors waived or agreed to waive any emoluments, and no emoluments have been paid to the directors or any employee as an inducement to join or upon joining the Target or as compensation for loss of office.

7. INDIVIDUALS WITH HIGHEST EMOLUMENTS

The highest emoluments in respect of the five individuals are as follows:

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Salaries, allowance and benefits in kind 523,620 276,103 1,857,885 854,000 736,888 Contribution to defined contribution retirement plans 211,019 111,270 179,591 83,080 70,446

Total 734,639 387,373 2,037,476 937,080 807,334

– IIIB-17 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

The emoluments of the above individuals with the highest emoluments are within the following band:

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

Nil to RMB1,000,000 55555

8. EARNINGS PER SHARE

No earnings per share for the Relevant Periods and six months ended 30 June 2014 is presented as its inclusion is considered not meaningful for the purpose of this report.

9. DIVIDENDS

During the Relevant Periods, the directors of the Target did not recommend the payment of a dividend.

10. PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures and Motor Plant and office vehicles machinery equipment Total RMB RMB RMB RMB

Reconciliation of carrying amount – year ended 31 December 2012 At the beginning of the year 257,305 278,741 176,065 712,111 Additions – – 14,858 14,858 Depreciation (87,652) (29,260) (79,645) (196,557)

At the end of the year 169,653 249,481 111,278 530,412

Reconciliation of carrying amount – year ended 31 December 2013 At the beginning of the year 169,653 249,481 111,278 530,412 Disposal – (242,166) – (242,166) Depreciation (81,181) (7,315) (53,362) (141,858)

At the end of the year 88,472 – 57,916 146,388

Reconciliation of carrying amount – year ended 31 December 2014 At the beginning of the year 88,472 – 57,916 146,388 Depreciation (31,660) – (52,084) (83,744)

At the end of the year 56,812 – 5,832 62,644

– IIIB-18 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Furniture, fixtures and Motor Plant and office vehicles machinery equipment Total RMB RMB RMB RMB

Reconciliation of carrying amount – period ended 30 June 2015 At the beginning of the period 56,812 – 5,832 62,644 Depreciation (22,439) – (2,730) (25,169)

At the end of the period 34,373 – 3,102 37,475

At 31 December 2012 Cost 315,795 308,000 252,730 876,525 Accumulated depreciation (146,142) (58,519) (141,452) (346,113)

169,653 249,481 111,278 530,412

At 31 December 2013 Cost 315,795 – 252,730 568,525 Accumulated depreciation (227,323) – (194,814) (422,137)

88,472 – 57,916 146,388

At 31 December 2014 Cost 315,795 – 211,964 527,759 Accumulated depreciation (258,983) – (206,132) (465,115)

56,812 – 5,832 62,644

At 30 June 2015 Cost 315,795 – 211,964 527,759 Accumulated depreciation (281,422) – (208,862) (490,284)

34,373 – 3,102 37,475

11. PROPERTIES UNDER DEVELOPMENT AND COMPLETED PROPERTIES HELD FOR SALE

As at As at 31 December 30 June 2012 2013 2014 2015 Note RMB RMB RMB RMB

Properties under development (a) 246,748,033 129,721,853 21,033,790 22,108,140 Completed properties held for sale (b) – 143,917,055 305,599,819 151,637,939

246,748,033 273,638,908 326,633,609 173,746,079

(a) The properties under development include costs of acquiring rights to use certain lands, which are located in the PRC for property development. Land use rights are held on leases of between 40 and 70 years.

– IIIB-19 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

The amount of properties under development expected to be recovered after more than one year is RMB102,830,978, RMB Nil, RMB Nil and RMB Nil as at 31 December 2012, 2013, 2014 and 30 June 2015 respectively.

(b) All completed properties held for sale are located in the PRC.

12. TRADE AND OTHER RECEIVABLES

As at As at 31 December 30 June 2012 2013 2014 2015 Note RMB RMB RMB RMB

Trade receivables From third parties (a) 3,637,000 720,000 450,000 450,000

Other receivables Deposits 2,920,014 2,602,665 2,569,753 2,591,270 Land development expenditure (b) 42,509,559 44,775,471 44,775,471 124,751,207 Prepaid business tax and other taxes 6,907,254 9,025,239 10,698,231 3,400,874 Amount due from an equity holder (c) 2,380,000 2,380,000 2,380,000 2,380,000 Prepayments and other receivables (d) 66,956,744 2,133,871 2,302,713 9,241,911

121,673,571 60,917,246 62,726,168 142,365,262

125,310,571 61,637,246 63,176,168 142,815,262

(a) Trade receivables mainly arose from sales of properties. Proceeds in respect of sales of properties are to be received in accordance with the terms of the related sales and purchase agreements. Generally, purchasers of properties are required to settle the balance within 30 days as specified in the sales and purchase agreements or not granted with any credit period.

The ageing analysis of trade receivables as at the end of each reporting period is as follows:

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

Within 365 days 3,637,000 310,000 – – Over 365 days – 410,000 450,000 450,000

3,637,000 720,000 450,000 450,000

The Target has no significant accounts receivable balances which are past due at the end of each reporting period.

The maximum exposure to credit risk at the end of each reporting period is the carrying value of each class of receivables mentioned above. The Target has retained the legal titles of the properties sold to these customers before the trade receivables are settled.

– IIIB-20 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

(b) The balances represented monies advanced to the local government for land development works at a land site. The Target will be reimbursed for the amount advanced to the local government in carrying out the land development irrespective of whether the Target will obtain the land use rights of the land in the future.

(c) The amount due from Cui Guiying, an equity holder who holds 49% interests of the Target is unsecured, interest free and has no fixed repayment term. The balance will be settled before the completion of the Acquisition.

(d) Included in prepayments and other receivables at 31 December 2012 was amount due from a key management personnel of RMB61,614,875 which was unsecured, interest-free and repayable on demand. Further advances of RMB9,394,336 was made to this key management personnel in early 2013. At 31 December 2013, the directors of the Target wrote off the entire balance of RMB71,009,211 with a view that the balance became irrecoverable upon the departure of the key management personnel. The write off of the balances was charged to the profit or loss under other operating expense.

13. CASH AND BANK BALANCES

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

Cash equivalents 1,872,435 155,465 1,978,603 1,291,041 Restricted bank deposits (note (a)) 2,133,728 5,591,307 80,177,198 3,979,393

Total cash and bank balances 4,006,163 5,746,772 82,155,801 5,270,434

(a) In accordance with relevant documents issued by the PRC local State-Owned Land and Resource Bureau, the Target is required to place certain of the proceeds received from pre-sale of properties as guarantee deposits for construction of the properties. The restriction will be released upon the construction is completed. Restricted cash earns interest at floating daily bank deposit rates.

14. TRADE AND OTHER PAYABLES

As at As at 31 December 30 June 2012 2013 2014 2015 Note RMB RMB RMB RMB

Trade payables To third parties (a) 2,045,153 31,459,645 37,470,518 48,704,709

Other payables Interest payable 20,855,405 16,012,058 18,987,005 18,987,005 Deposits received 2,250,000 1,850,000 1,450,000 1,450,000 Amount due to a related party (b) 40,385,801 – – – Other creditors 10,035,870 97,630,249 21,815,970 15,120,751

73,527,076 115,492,307 42,252,975 35,557,756

75,572,229 146,951,952 79,723,493 84,262,465

– IIIB-21 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

(a) The ageing analysis of trade payables of the Target as follows:

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

Within 365 days 2,045,153 31,459,645 36,113,360 43,523,714 Over 365 days – – 1,357,158 5,180,995

2,045,153 31,459,645 37,470,518 48,704,709

(b) The amount was due to Li Guowen who was the key management personnel of the Target and the spouse of Wang Dongwei, an equity holder who holds 51% interests of the Target. The amount due was unsecured, interest free and had no fixed repayment term.

15. DEPOSITS FROM SALE OF PROPERTIES

Deposits from sale of properties in the amount of RMB45,711,522, RMB4,555,419, RMB13,399,238 and RMB8,335,561 as at 31 December 2012, 2013, 2014 and 30 June 2015 are expected to be recognised as income in the statement of comprehensive income after more than one year.

16. INTEREST-BEARING BORROWINGS

As at As at 31 December 30 June 2012 2013 2014 2015 Note RMB RMB RMB RMB

Interest-bearing borrowings repayable within one year or on demand: Secured (a) – – 143,900,000 143,900,000 Unsecured (b) 132,441,135 71,307,101 63,018,996 58,427,783

132,441,135 71,307,101 206,918,996 202,327,783

The weighted average effective interest rate on the interest-bearing borrowing is 9.6% per annum.

(a) On 25 September 2014, 上海潤迅概念通信產品連鎖銷售有限公司 (Shanghai CM Concept Communications Products Franchise Sale Company Limited#) (the “Lender”), a third party, entered into the entrusted loan agreement with the Target to grant a loan in the principal amount of RMB143.9 million through a bank in the PRC.

The entrusted loan was mature in 6 months from 25 September 2014 and carried interest as a rate of 10% per annum. The entrusted loan is secured by share charge over the 100% equity interest of the Target pursuant to a deed of guarantee dated 25 September 2014, and the accounts receivable balance generated from the sale of the property development project of the Target. On 25 March 2015, the entrusted loan was extended to 26 September 2015 in the 1st extension and was further extended to 25 March 2016 in the 2nd extension.

Details of the original and entrusted loan agreement and entrusted loan extension agreement are set out in announcement of Ground Properties Company Limited, the holding company of the Lender dated 25 September 2014, circular dated 30 April 2015 and announcement date 25 September 2015 respectively.

– IIIB-22 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

(b) In 2012, the Target entered into borrowing arrangements with twenty-nine individual third parties. All the borrowings were unsecured, bear fixed interest rates ranging from 15% to 42% per annum and were repayable within one year or on demand. Pursuant to supplemental agreements entered into with the remaining twenty individual third parties in 2014, these borrowing arrangements became interest free effective from 30 September 2014 and repayable within one year or on demand. The remaining outstanding balances will be settled by a combination of internal funds and external financing of the Enlarged Group.

Included in unsecured interest bearing borrowings as at 31 December 2012, 2013 and 2014 and 30 June 2015 were loan from an equity holder of RMB2,000,000, RMB1,400,000, RMB1,400,000 and RMB980,000 respectively, which was interest bearing at 15% per annum up to 30 September 2014 and became interest free thereafter and guaranteed by Ms. Wang Dongwei, equity holder of the Target, pursuant to a supplemental agreement entered in 2014. The related interest payable as at 31 December 2012, 2013, 2014 and 30 June 2015, included in other payables, amounted to RMB687,167, RMB897,167, RMB1,054,667 and RMB1,054,667. The outstanding principal and interest will be settled prior to the completion of the Acquisition.

The remaining unsecured interest bearing borrowings were loans from individual third parties of RMB130,441,135, RMB69,907,101, RMB61,618,996 and RMB57,447,783 as at 31 December

2012, 2013 and 2014 and 30 June 2015 respectively.

17. PAID-UP CAPITAL

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

Registered and paid-up 50,000,000 50,000,000 50,000,000 50,000,000

The Target was established in the PRC with limited liability on 19 November 2009. The registered and paid-up capital was increased to RMB200,000,000 on 8 September 2015.

– IIIB-23 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

18. CASH (USED IN) GENERATED FROM OPERATIONS

Year ended 31 December Six months ended 30 June 2012 2013 2014 2014 2015 RMB RMB RMB RMB RMB (unaudited)

(Loss) profit before tax (14,194,264) (75,488,412) (10,155,607) (3,946,817) 15,643,572 Depreciation 196,557 141,858 83,744 44,825 25,169 Loss on disposal of property, plant and equipment – 62,166 – – – Write off of other receivables – 71,009,211 – – – Interest income – (7,404) (40,012) (3,940) (70,741) Interest expenses 8,935,701 28,362 86,787 39,916 19,522 Change in working capital: Properties under development and completed properties held for sale (12,932,650) (22,702,089) (46,482,144) (21,110,477) 160,162,474 Trade and other receivables (54,887,151) (7,335,886) (1,538,922) 1,128,366 (79,639,094) Restricted bank deposits (1,879,660) (3,457,579) (74,585,891) 2,619,887 76,197,805 Trade and other payables (129,521,811) 71,379,723 (67,228,459) 8,702,707 4,538,972 Deposits from sale of properties 80,262,900 31,029,998 73,502,223 22,368,224 (164,178,774)

Cash (used in) generated from operations (124,020,378) 64,659,948 (126,358,281) 9,842,691 12,698,905

19. DEFERRED TAXATION

The movement for the Relevant Periods in the Target’s net deferred tax asset was as follows:

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

At the beginning of the year/period – – 1,119,800 3,633,702 Charged to profit or loss – 1,119,800 2,513,902 (3,633,702)

At the end of the year/period – 1,119,800 3,633,702 –

Recognised deferred tax assets at the end of the Relevant Periods represent the following:

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

Tax losses – 1,119,800 3,633,702 –

– IIIB-24 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

20. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Target has established policies and procedures for identifying, evaluation, monitoring and controlling the various types of risks pertaining to the Target’s business. The management policies for the major types of risks are as follows:

Credit risk

As at 31 December 2012, 2013, 2014 and 30 June 2015, the Target’s maximum exposure to credit risk which will cause a financial loss to the Target due to failure to discharge an obligation by the counterparties is the carrying amount of the respective recognised financial assets as stated in the statement of financial position. The Target’s credit risk is primarily attributable to accounts and other receivables.

For property sales, the Target has retained the legal titles of the properties sold to the customers before the accounts receivables are settled. In this regard, the management considers that the Target’s credit risk is significantly reduced.

In respect of other receivables, individual credit evaluations are performed taking into account of the debtor’s repayment ability. Monitoring procedures are in place on an ongoing basis in order to reduce credit risk.

Interest rate risk

Interest rate risk is the risk that the Target’s position may be adversely affected by a change of market interest rates. Carrying amounts of financial instruments reported on the statement of financial position approximate their fair values, and there is no significant interest rate risk exposure in relation to these instruments as the Target’s interest bearing borrowings are at fixed interest rates and the interest rate for bank deposits is not expected to change significantly.

Liquidity risk

The Target’s objective is to maintain a balance between continuity of funding and flexibility through the proceeds from pre-sale of properties and utilisation of borrowings. The maturity profile of the Target’s financial liabilities at the end of the reporting period are all due on demand or within one year.

– IIIB-25 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Total Carrying cash undiscounted flow amount RMB RMB

At 31 December 2012 Trade and other payables 75,572,229 75,572,229 Interest-bearing borrowings 144,264,407 132,441,135

219,836,636 208,013,364

At 31 December 2013 Trade and other payables 146,951,952 146,951,952 Interest-bearing borrowings 87,319,159 71,307,101

234,271,111 218,259,053

At 31 December 2014 Trade and other payables 79,723,493 79,723,493 Interest-bearing borrowings 225,906,001 206,918,996

305,629,494 286,642,489

At 30 June 2015 Trade and other payables 84,262,465 84,262,465 Interest-bearing borrowings 221,314,788 202,327,783

305,577,253 286,590,248

Fair value

The carrying amount of the Target’s financial assets, including trade and other receivables and financial liabilities, including other payables and interest-bearing borrowings are approximate their fair values.

21. CAPITAL MANAGEMENT

The objectives of the Target’s capital management are to safeguard the entity’s ability to continue as a going concern and to provide returns for its owners. The Target manages its capital structure and makes adjustments, including payment of dividend to its owners, return capital to its owners or issue new capital or sell assets to reduce debts. No changes were made in the objectives, policies or processes during the Relevant Periods.

22. CONTINGENT LIABILITIES

The Target has arranged bank financing for certain purchasers of the target’s property units and provided guarantees to secure obligations of such purchasers for repayments. As at 31 December 2012, 31 December 2013, 31 December 2014 and 30 June 2015, guarantees amounting to RMB2,108,330, RMB2,776,305, RMB2,943,420 and RMB3,831,039 are given to banks with respect to loans procured by purchasers of the Target’s properties respectively. Such guarantees terminate upon the earlier of (i) issuance of the real estate ownership certificate to the purchasers or (ii) the satisfaction of mortgaged loan by the purchasers of properties.

– IIIB-26 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IIIB ACCOUNTANTS’ REPORT ON WAN SHENG

Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Target is responsible to repay the outstanding mortgage principals together with accrued interest and penalty owed by the defaulted purchasers to the banks and the Target is entitled to take over the legal title and possession of the related properties. The Target’s guarantee period starts from the dates of grant of the mortgages. During the Relevant Periods, the Target did not incur any material losses in respect of any of these guarantees. The directors consider that the likelihood of default in payments by purchasers is minimal and therefore the financial guarantee measured at fair value is immaterial. Also, in case of default on payments, the net realisable value of the related property units would be sufficient to repay the outstanding mortgages loans together with any accrued interest and penalty, and therefore no provision has been made in connection with the guarantees.

23. COMMITMENTS

As at As at 31 December 30 June 2012 2013 2014 2015 RMB RMB RMB RMB

Planned expenditure in respect of the properties development contracted for but not provided 207,720,219 178,101,575 108,363,693 89,457,658

C. SUBSEQUENT FINANCIAL STATEMENTS

No audit financial statements have been prepared by the Target in respect of any period subsequent to 30 June 2015.

– IIIB-27 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

INTERIM RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS For the six months ended 30 September 2015

The board (the “Board”) of directors (the “Directors”) of Ground Properties Company Limited (the “Company”) announces the unaudited condensed consolidated interim results of the Company and its subsidiaries (collectively, the “Group”) for the six months ended 30 September 2015 together with the comparative figures as follows:

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) Note HK$’000 HK$’000 (Restated)

Revenue 4 104,770 42,946 Cost of sales and services (54,880) (21,114)

Gross profit 49,890 21,832 Other revenue 4 10,822 2,044 Other net income – 2,098 Distribution costs (27,804) (14,836) Administrative expenses (45,497) (39,483) Finance costs 5 (11,432) (5,808) Share of results of associates (1,247) (891) Share of results of a joint venture 268 –

Loss before taxation 6 (25,000) (35,044) Income tax 7 (5,404) (870)

Loss for the period (30,404) (35,914)

Loss attributable to: Shareholders of the Company (30,404) (35,911) Non-controlling interests – (3)

Loss for the period (30,404) (35,914)

Losses per share (HK cents) – Basic and diluted 8 (3.54) (4.67)

–IV-1– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30 September 2015

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000

Loss for the period (30,404) (35,914)

Other comprehensive income for the period, net of tax Items that may be reclassified subsequently to profit or loss: Exchange difference on translation of foreign operations (1,419) 517

Total comprehensive income for the period (31,823) (35,397)

Total comprehensive income attributable to: Shareholders of the Company (31,823) (35,394) Non-controlling interests – (3)

(31,823) (35,397)

–IV-2– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 September 2015

30 September 31 March 2015 2015 (Unaudited) (Audited) Note HK$’000 HK$’000

Non-current assets Investment properties 340,000 340,000 Property, plant and equipment 7,486 6,606 Interests in associates 385,540 386,532 Interests in a joint venture 10,540 10,597

743,566 743,735

Current assets Inventories 28,284 30,859 Trade and other receivables 10 55,756 42,116 Entrusted loan receivable 11 175,552 179,830 Pledged bank deposits 12 198,488 203,326 Bank balances and cash 25,873 71,966

483,953 528,097

Current liabilities Trade and other payables 13 32,677 39,656 Interest-bearing borrowings 14 324,755 319,574 Tax payable 3,045 1,835

360,477 361,065

Net current assets 123,476 167,032

Total assets less current liabilities 867,042 910,767

–IV-3– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

30 September 31 March 2015 2015 (Unaudited) (Audited) Note HK$’000 HK$’000

Non-current liabilities Interest-bearing borrowings 14 162,000 178,000 Deferred tax liabilities 5,099 5,099

167,099 183,099

NET ASSETS 699,943 727,668

CAPITAL AND RESERVES Share capital 15 42,923 42,923 Reserves 657,168 684,893

Total capital and reserves attributable to shareholders of the company 700,091 727,816 Non-controlling interests (148) (148)

TOTAL EQUITY 699,943 727,668

–IV-4– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 September 2015

Attributable to shareholders of the Company Non- distributable Non- Issued capital Contributed Accumulated controlling Total capital reserves surplus profits Total interests equity (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balance at 1 April 2015 42,923 359,877 210,587 114,429 727,816 (148) 727,668

Exchange difference – (1,419) – – (1,419) – (1,419) Loss for the period – – – (30,404) (30,404) – (30,404) Total comprehensive income for the period – (1,419) – (30,404) (31,823) – (31,823) Grant of share options – 4,098 – – 4,098 – 4,098 Lapse of share options – (900) – 900–––

Balance at 30 September 2015 42,923 361,656 210,587 84,925 700,091 (148) 699,943

Balance at 1 April 2014 28,532 62,454 210,587 134,344 435,917 (142) 435,775

Exchange difference – 517 – – 517 – 517 Loss for the period – – – (35,911) (35,911) (3) (35,914) Total comprehensive income for the period – 517 – (35,911) (35,394) (3) (35,397) Issue of shares 14,391 272,022 – – 286,413 – 286,413 Grant of share options – 22,936 – – 22,936 – 22,936

Balance at 30 September 2014 42,923 357,929 210,587 98,433 709,872 (145) 709,727

–IV-5– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30 September 2015

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000 (Restated)

OPERATING ACTIVITIES Cash used in operations (37,528) (63,541) Interest received 9,863 1,372 Interest paid (6,184) (3,363) Income tax paid (4,194) (259)

Net cash used in operating activities (38,043) (65,791)

INVESTING ACTIVITIES Payment for purchase of property, plant and equipment (2,050) (170) Acquisition of interests in a subsidiary (net of cash and cash equivalents) – (1,683) Increase in entrusted loan receivable – (181,945)

Net cash used in investing activities (2,050) (183,798)

FINANCING ACTIVITIES New bank loans raised 32,203 204,956 Repayment of bank loans (38,203) – Issue of share capital – 286,413 Increase in pledged bank deposits – (205,717)

Net cash (used in) from financing activities (6,000) 285,652

Net (decrease) increase in cash and cash equivalents (46,093) 36,063

Cash and cash equivalents at the beginning of the period 71,966 38,860

Cash and cash equivalents at the end of the period, represented by bank balances and cash 25,873 74,923

–IV-6– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

This interim financial report has been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The interim financial report has been prepared in accordance with the same accounting policies adopted in the 2015 annual financial statements, except for the accounting policy changes that are expected to be reflected in the 2016 annual financial statements. Details of any changes in accounting policies are set out in note 2.

The preparation of an interim financial report in conformity with HKAS 34 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

This interim financial report contains condensed consolidated financial statements and selected explanatory notes. The notes include an explanation of events and transactions that are significant to an understanding of the changes in financial position and consolidated interim financial statements and notes thereon do not include all of the information required for full set of financial statements prepared in accordance with Hong Kong Accounting Standards, Hong Kong Financial Reporting Standards and interpretations (collectively the “HKFRSs”).

The interim financial report is unaudited, but has been reviewed by Mazars CPA Limited (“Mazars”) in accordance with Hong Kong Standard on Review Engagements 2410, “Review of interim financial information performed by the independent auditor of the entity”, issued by the HKICPA. Mazars’s independent review report to the Board of Directors is included on page 34.

The financial information relating to the financial year ended 31 March 2015 that is included in the interim financial report as comparative information does not constitute the Company’s statutory annual consolidated financial statements for that financial year but is derived from those financial statements. Further information relating to these statutory financial statements is set out in the Company’s website at www.groundproperties.com.

2. PRINCIPAL ACCOUNTING POLICIES

The accounting policies used in the preparation of the interim financial report are consistent with those used in the annual financial statements of the Group for the year ended 31 March 2015, except for the adoption of the new and revised HKFRSs described below.

In the current interim period, the Group has applied, for the first time, the following amendments issued by the HKICPA, which are effective for the Group’s accounting period beginning on 1 April 2015.

Amendments to HKAS 19 (2011), Defined benefit plans: Employee contributions Annual improvements to HKFRSs 2010-2012 cycle Annual improvements to HKFRSs 2011-2013 cycle

The application of the above had no material effect on the results and financial positions of the Group for the current or prior accounting periods.

The Group has not early adopted the new standards, amendments to standard and interpretations, which have been issued but are not yet effective for the financial year beginning on 1 April 2015.

The Directors are in the process of assessing the possible impact on the future adoption of these new/revised HKFRSs, but are not yet in a position to reasonably estimate their impact on the Group’s consolidated financial statements.

–IV-7– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

3. SEGMENT INFORMATION

The Group is principally engaged in the provision of telecommunications retail sales and management services, property investment and property development and management.

The Group’s reportable segments are as follows:

Operating segments Nature of business activities Place of operation

1 Telecommunications retail Sale of mobile phones, headphone, The People’s Republic sales and management telecommunications equipment of China (the “PRC”) services and other products and provision for (i) telecommunications call centre services*; and (ii) telecommunications retail sales and management services

2 Property investment Property holding for long term Hong Kong investment and leasing purposes

3 Property development and Property development and PRC management provision of management service to property project

4 Others Other businesses including Hong Kong and PRC investment holdings

* The Group’s telecommunications call centre services operation commenced contributing revenue to the Group since December 2014.

An analysis of the Group’s turnover and results for the period by operating segments is as follows:

Tele- communications retail sales Property and development For the six months ended management Property and 30 September 2015 services investment management Others Group (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Segment Revenue Revenue from external customers 104,770 – – – 104,770

Segment results 12,413 (1,464) (8,063) (26,317) (23,431)

Interest income 9,863 Finance costs (11,432)

Loss before taxation (25,000) Income tax (5,404)

Loss for the period (30,404)

Included in segment results: Share of results of associates – – (1,247) – (1,247) Share of results of a joint venture 268 – – – 268

–IV-8– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

Tele- communications retail sales Property For the six months ended and development 30 September 2014 management Property and (Restated) services investment management Others Group (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Segment Revenue Revenue from external customers 42,480 448 18 – 42,946

Segment results 4,056 (801) (16,117) (17,746) (30,608)

Interest income 1,372 Finance costs (5,808)

Loss before taxation (35,044) Income tax (870)

Loss for the period (35,914)

Included in segment results: Share of results of associates – – (891) – (891)

4. REVENUE

The Group’s revenue recognised by category are as follows:

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000

Sale of mobile phones, headphones, telecommunications equipment and other products 43,606 26,269 Rental income – 448 Telecommunications call centre services income 28,284 – Telecommunications retail sales and management services income 32,880 16,211 Project management income – 18

Revenue 104,770 42,946

Interest income 9,863 1,372 Others 959 672

Other revenue 10,822 2,044

Total revenue 115,592 44,990

–IV-9– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

5. FINANCE COSTS

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000

Interest on bank loans repayable within five years 6,267 3,363 Interest on promissory notes 5,165 2,445

11,432 5,808

6. LOSS BEFORE TAXATION

This is stated after charging:

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) Note HK$’000 HK$’000

Staff costs (include Directors’ emoluments) (a) 32,981 24,704 Cost of inventories 33,355 19,269 Depreciation 1,032 413 Operating lease charges on premises 6,165 3,498 Equity-settled share-based payment in respect of consultancy services – 15,705

Note:

(a) Included in staff costs was equity-settled share-based payment expenses of HK$4,098,000 (2014: HK$7,231,000) arising from 29,950,000 share options granted to the Directors and employees of the Group in October 2014.

7. INCOME TAX

No provision for Hong Kong Profits Tax has been made for both periods as the Group has no assessable profits arising in Hong Kong or taxable profits were wholly absorbed by estimated tax losses brought forward.

The PRC Enterprise Income Tax (“EIT”) has been provided for based on the estimated assessable profits in accordance with the relevant tax laws applicable to the subsidiaries in the PRC. The statutory EIT rate in the PRC is 25% (2014: 25%).

The major component of income tax charge is:

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000

Current tax PRC Enterprise Income Tax 5,404 870

Tax charge for the period 5,404 870

– IV-10 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

8. LOSS PER SHARE

The calculation of basic loss per share is based on the losses attributable to ordinary shareholders for the period of HK$30,404,000 (2014: HK$35,911,000) and the weighted average of 858,450,000 ordinary shares in issue during the period (2014: 769,120,546 ordinary shares).

Diluted loss per share for the six months ended 30 September 2015 and 2014 are the same as the basic loss per share as the potential ordinary shares are anti-dilutive.

9. DIVIDEND

The Directors do not recommend the payment of any interim dividend for the six months ended 30 September 2015 (2014: Nil).

10. TRADE AND OTHER RECEIVABLES

30 September 31 March 2015 2015 (Unaudited) (Audited) Note HK$’000 HK$’000

Trade receivables Trade receivables from third parties (a) 37,099 28,537

Other receivables Deposits, prepayments and other receivables 18,657 13,579

55,756 42,116

Note:

(a) The Group has established credit policies for customers in each of its core businesses. The average credit period granted for trade receivables ranges from 30 to 60 days. The carrying amount of the receivables due approximates their fair values.

The ageing analysis of the trade receivables (net of allowance for doubtful debts) by invoice date as at the end of the reporting period is as follows:

30 September 31 March 2015 2015 (Unaudited) (Audited) HK$’000 HK$’000

0 – 30 days 24,312 18,860 31 – 60 days 8,963 5,621 61 – 90 days 3,437 4,038 Over 90 days 387 18

37,099 28,537

Included in the Group’s trade receivables balance are debtors with a carrying amount of HK$3,824,000 (31 March 2015: HK$4,056,000) which are past due at the end of the reporting period for which the Group has not impaired. These receivables relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances. These receivables are 0-30 days past due but not impaired (31 March 2015: 0-30 days).

–IV-11– THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

11. ENTRUSTED LOAN RECEIVABLE

A wholly-owned subsidiary of the Company (the “Lender”) entered into an entrusted loan agreement with a property development company in the PRC (the “Borrower”) to grant a loan to the Borrower in the principal amount of RMB143,900,000 (equivalent to approximately HK$175,552,000) through a bank in the PRC. A bank deposit of RMB143,900,000 (equivalent to approximately HK$175,552,000), as set out in note 12, has been used to secure the entrusted bank loan shown in note 14(b) in order to facilitate the entrusted loan receivable. The purpose of the entrusted loan was for the construction cost of residential units relating to property development at a property project and the potential property project to be developed by the Borrower.

The original entrusted loan was for an initial period of 6 months from 26 September 2014 with an interest rate of 10% per annum. The entrusted loan is secured by share charge over the 100% equity interest of the Borrower pursuant to a deed of guarantee dated 25 September 2014, and the account receivable balance generated from the sale of the property development project of the Borrower.

On 25 March 2015, an entrusted loan extension agreement was signed between the Borrower and the Lender that the maturity date of the loan was extended to 26 September 2015. On 25 September 2015, a supplemental agreement was signed to further extend the maturity date of the loan to 25 March 2016. The entrusted loan receivable is neither past due nor impaired.

12. PLEDGED BANK DEPOSITS

A bank deposit of RMB143,900,000 (equivalent to approximately HK$175,552,000) is pledged as cash collateral for the entrusted loan obtained from a bank in the PRC, which was used to finance the entrusted loan receivable made to an independent third party. The details of which are set out in note 11 and note 14(b).

A bank deposit of RMB18,800,000 (equivalent to approximately HK$22,936,000) is pledged as cash collateral for the operation to a wholly-owned subsidiary of the Company in the PRC as trust receipt loan of HK$22,203,000, details of which are set out in note 14(c).

All pledged bank deposits earn interest income at a prevailing rate as published by the People’s Bank of China.

Pledged bank deposits denominated in Renminbi (expressed in Hong Kong dollars) are as follows:

30 September 31 March 2015 2015 (Unaudited) (Audited) HK$’000 HK$’000

Renminbi 198,488 203,326

13. TRADE AND OTHER PAYABLES

30 September 31 March 2015 2015 (Unaudited) (Audited) HK$’000 HK$’000

Trade and bills payables 7,662 20,443

Other payables Accrued charges and other creditors 24,550 19,094 Deposits received 465 119

25,015 19,213

32,677 39,656

– IV-12 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

The ageing analysis of trade payables by invoice date as at the end of the reporting period is as follows:

30 September 31 March 2015 2015 (Unaudited) (Audited) HK$’000 HK$’000

0 – 30 days 6,538 19,332 31 – 60 days 219 286 61 – 90 days 149 170 Over 90 days 756 655

7,662 20,443

14. INTEREST-BEARING BORROWINGS

30 September 31 March 2015 2015 (Unaudited) (Audited) Note HK$’000 HK$’000

Secured bank loans (a) 204,000 210,000 Secured entrusted bank loan (b) 175,552 179,830 Secured trust receipt loan (c) 22,203 22,744 Unsecured promissory notes (d) 85,000 85,000

486,755 497,574

The maturity of the interest-bearing borrowings is as follows:

Within one year 324,755 319,574 In the second year 32,000 32,000 In the third to fifth years, inclusive 130,000 146,000

486,755 497,574 Portion classified as current liabilities (324,755) (319,574)

Non-current portion 162,000 178,000

Notes:

(a) The bank loans of HK$204,000,000 was secured by the investment properties of HK$340,000,000. The secured bank loans bear interest at HIBOR plus 3% per annum.

(b) The secured entrusted bank loan was raised to facilitate the entrusted loan receivable of HK$175,552,000 shown in note 11. The entrusted loan is secured by a bank deposit of RMB143,900,000 shown in note 12 and bears an interest at a prevailing rate as published by the People’s Bank of China plus 0.05%. The entrusted loan is repayable in March 2016.

(c) The trust receipt loan of HK$22,203,000 was secured by a bank deposit of HK$22,936,000 made with a bank in the PRC. This loan bears interest at a fixed rate of 1.55% per annum and repayable within one year.

(d) The promissory notes of HK$85,000,000 were unsecured and bear interest at rates ranging from 4% to 12% per annum depends on the repayment date of the principal amounts. The principal of promissory notes, together with interest expenses of HK$13,884,000, were settled on 28 October 2015.

– IV-13 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

15. SHARE CAPITAL

30 September 2015 31 March 2015 (Unaudited) (Audited) Number of shares HK$’000 Number of shares HK$’000

Authorised: Ordinary shares of HK$0.05 each 15,600,000,000 780,000 15,600,000,000 780,000

Issued and fully paid: Ordinary shares of HK$0.05 each 858,450,000 42,923 858,450,000 42,923

16. RELATED PARTY TRANSACTIONS

The Group has the following material related party transactions during the period, which were carried out in the normal course of business and on terms arranged by or between the parties concerned:

Six months ended 30 September 2015 2014 (Unaudited) (Unaudited) HK$’000 HK$’000

Key management personnel Compensation for key management personnel, including amount paid to the Company’s directors and certain of the highest paid employees is as follows: – Salaries, allowances and benefit in kinds 7,022 4,076 – Retirement scheme contributions 228 44

7,250 4,120

17. COMMITMENTS

Commitments under operation leases – the Group as lessee

At the end of the reporting period, the Group had total future minimum lease payments under non-cancellable operating leases, which are payable as follows:

30 September 31 March 2015 2015 (Unaudited) (Audited) HK$’000 HK$’000

In respect of leased properties: Within one year 11,552 10,175 In the second to fifth years inclusive 12,818 9,699

24,370 19,874

18. COMPARATIVE FIGURES

Conforming to current year’s presentation, the expenses of HK$12,421,000 for the six months ended 30 September 2014 that were included in administrative expenses have been reclassified to distribution costs. Moreover, the increase in entrusted loan receivable has been reclassified from operating activities to investing activities in the condensed consolidated statement of cash flows. The revised presentation reflects more appropriately the nature of these items. These reclassifications have no effect on the reported financial position, results or cash flows of the Group.

– IV-14 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

To the Board of Directors of Ground Properties Company Limited (incorporated in Bermuda with limited liability)

INTRODUCTION

We have reviewed the interim financial information set out on pages [IV-1] to [IV-14], which comprises the condensed consolidated statement of financial position of Ground Properties Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of 30 September 2015 and the related condensed consolidated statement of profit or loss, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the six months period then ended and explanatory notes. The Main Board Listing Rules governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 “Interim Financial Reporting” (“HKAS 34”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with HKAS 34.

Our responsibility is to express a conclusion on this interim financial information based on our review, and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the HKICPA. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

– IV-15 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information is not prepared, in all material respects, in accordance with HKAS 34.

Mazars CPA Limited Certified Public Accountants Hong Kong 27 November 2015

Chan Wai Man Practising Certificate number: P02487

– IV-16 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

AUDITORS’ REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE TWELVE MONTHS ENDED 31 MARCH 2015

Set out below is the auditors’ report extracted from the annual report of the Company for the twelve months ended 31 March 2015.

To the shareholders of Ground Properties Company Limited (incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of Ground Properties Company Limited (the “Company”) and its subsidiaries (together the “Group”) set out on pages IV-19 to IV-76, which comprise the consolidated and the Company’s statements of financial position as at 31 March 2015, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with section 90 of the Companies Act 1981 of Bermuda (as amended), and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

– IV-17 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2015 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Mazars CPA Limited Certified Public Accountants Hong Kong, 26 June 2015

Chan Wai Man Practising Certificate number: P02487

– IV-18 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED INCOME STATEMENT Year ended 31 March 2015

2015 2014 Note HK$’000 HK$’000 (Restated)

Turnover 6 129,494 56,211

Cost of sales and services (73,487) (16,797)

Gross profit 56,007 39,414

Other revenue 6 11,295 4,236 Other net income 7 989 13,809 Distribution costs (33,327) (27,437) Administrative expenses (64,907) (39,553) Finance costs 9 (16,743) (3,747) Change in fair value of investment properties 15 25,000 11,000 Share of results of associates 19 2,641 (1,081) Share of results of a joint venture 20 429 –

Loss before taxation 10 (18,616) (3,359)

Taxation 12 (4,103) (497)

Loss for the year (22,719) (3,856)

Loss attributable to: Shareholders of the Company (22,713) (3,850) Non-controlling interests (6) (6)

(22,719) (3,856)

Loss per share Basic and diluted 14 (2.79) HK cents (0.68) HK cents

Details of dividend for the year are disclosed in note 31 to the consolidated financial statements.

– IV-19 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 March 2015

2015 2014 HK$’000 HK$’000

Loss for the year (22,719) (3,856)

Other comprehensive income: Items that are or may be reclassified subsequently to profit or loss: Exchange difference on consolidation 104 (50) Share of other comprehensive income of associates (28) – Reclassification adjustment relating to disposal of subsidiaries – (5,011)

Total other comprehensive income 76 (5,061)

Total comprehensive income for the year (22,643) (8,917)

Total comprehensive income attributable to: Shareholders of the Company (22,637) (8,911) Non-controlling interests (6) (6)

(22,643) (8,917)

– IV-20 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

STATEMENTS OF FINANCIAL POSITION As at 31 March 2015

Group Company 31 March 31 March 31 March 31 March 2015 2014 2015 2014 Note HK$’000 HK$’000 HK$’000 HK$’000

Non-current assets Investment properties 15 340,000 315,000 – – Property, plant and equipment 16 6,606 2,547 – – Goodwill 17 –––– Interests in subsidiaries 18 – – 991,109 730,467 Interests in associates 19 386,532 383,919 – – Interests in a joint venture 20 10,597 – – –

743,735 701,466 991,109 730,467

Current assets Inventories 21 30,859 1,580 – – Trade and other receivables 22 42,116 11,514 1,864 176 Entrusted loan receivable 23 179,830 – – – Pledged bank deposits 24 203,326 – – – Bank balances and cash 25 71,966 38,860 39,947 2,271

528,097 51,954 41,811 2,447

Current liabilities Trade and other payables 26 39,656 17,488 10,263 3,901 Interest-bearing borrowings 27 319,574 145,000 117,000 145,000 Tax payable 1,835 58 – –

361,065 162,546 127,263 148,901

Net current assets (liabilities) 167,032 (110,592) (85,452) (146,454)

Total assets less current liabilities 910,767 590,874 905,657 584,013

Non-current liabilities Interest-bearing borrowings 27 178,000 150,000 178,000 150,000 Deferred tax liabilities 28 5,099 5,099 – –

183,099 155,099 178,000 150,000

NET ASSETS 727,668 435,775 727,657 434,013

– IV-21 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

Group Company 31 March 31 March 31 March 31 March 2015 2014 2015 2014 Note HK$’000 HK$’000 HK$’000 HK$’000

CAPITAL AND RESERVES Share capital 29 42,923 28,532 42,923 28,532 Reserves 31 684,893 407,385 684,734 405,481

Total capital and reserves attributable to shareholders of the Company 727,816 435,917 727,657 434,013

Non-controlling interests (148) (142) – –

TOTAL EQUITY 727,668 435,775 727,657 434,013

Approved and authorised for issue by the Board of Directors on 26 June 2015.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY GROUP THE OF INFORMATION FINANCIAL IV APPENDIX Year ended 31 March 2015

Attributable to shareholders of the Company Reserves Properties Capital Enterprise Share Accumulated Non- Issued Share on revaluation Exchange redemption expansion Contributed option (losses) controlling Total capital premium consolidation reserve reserve reserve reserve surplus reserve profits Total interests equity HK$’000 HK$’000 HK$’000 HK$000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2013 28,205 35,383 4,900 9,294 8,950 450 65,434 210,587 4,986 71,008 439,197 5,934 445,131

Loss for the year –––––––––(3,850) (3,850) (6) (3,856)

Other comprehensive income: Exchange differences on consolidation ––––(50) –––––(50) – (50) Disposal of subsidiaries ––––(5,011) –––––(5,011) – (5,011)

Total other comprehensive income for the year ––––(5,061) –––––(5,061) – (5,061)

Total comprehensive income for the year ––––(5,061) ––––(3,850) (8,911) (6) (8,917)

Disposal of subsidiaries – IV-23 – ––––––(65,434) – – 65,434 – (6,070) (6,070)

Transactions with owners: Shares issued under share option scheme 327 7,864 ––––––(2,560) – 5,631 – 5,631 Lapse of share options ––––––––(1,752) 1,752 – – –

327 7,864 ––––––(4,312) 1,752 5,631 – 5,631 HSDCMN SI RF OM H NOMTO OTIE EENI NOPEEADI UJC OCAG.THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS

Attributable to shareholders of the Company GROUP THE OF INFORMATION FINANCIAL IV APPENDIX Reserves Properties Capital Enterprise Share Accumulated Non- Issued Share on revaluation Exchange redemption expansion Contributed option (losses) controlling Total capital premium consolidation reserve reserve reserve reserve surplus reserve profits Total interests equity HK$’000 HK$’000 HK$’000 HK$000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31 March 2014 and at 1 April 2014 28,532 43,247 4,900 9,294 3,889 450 – 210,587 674 134,344 435,917 (142) 435,775

Loss for the year –––––––––(22,713) (22,713) (6) (22,719)

Other comprehensive income: Exchange differences on consolidation ––––104–––––104–104 Share of other comprehensive income of associates ––––(28) –––––(28) – (28)

Total other comprehensive income for the year ––––76–––––76–76

Total comprehensive income for the year ––––76––––(22,713) (22,637) (6) (22,643)

Transactions with owners: Shares issued under share option scheme 84 2,066 ––––––(674) – 1,476 – 1,476

Shares issued on open offer – IV-24 – (Note 29) 14,307 271,843 ––––––––286,150 – 286,150 Share issuing expenses – (1,197) ––––––––(1,197) – (1,197) Share options granted ––––––––28,107 – 28,107 – 28,107 Lapse of share options ––––––––(2,798) 2,798 – – –

14,391 272,712 ––––––24,635 2,798 314,536 – 314,536

At 31 March 2015 42,923 315,959 4,900 9,294 3,965 450 – 210,587 25,309 114,429 727,816 (148) 727,668 THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 March 2015

2015 2014 Note HK$’000 HK$’000

OPERATING ACTIVITIES Cash (used in) generated from operations 32 (57,300) 17,609 Interest received 10,659 2,632 Interest paid (9,645) (2,779) Income tax paid (2,843) (169)

Net cash (used in) generated from operating activities (59,129) 17,293

INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment – 346 Net proceeds from disposal of subsidiaries – 5,309 Proceeds from disposal of club membership – 340 Payment for purchase of property, plant and equipment (619) (2,158) Acquisition of interests in subsidiaries and other assets 33 (12,993) (300,000) Increase in entrusted loan receivable (179,830) – Increase in pledged bank deposits (203,326) –

Net cash used in investing activities (396,768) (296,163)

FINANCING ACTIVITIES New bank loans raised 202,574 210,000 Proceeds from issue of new shares arising from the exercise of share options 1,476 5,631 Net proceeds from issue of new shares from open offer 284,953 –

Net cash from financing activities 489,003 215,631

Net increase (decrease) in cash and cash equivalents 33,106 (63,239)

Cash and cash equivalents at the beginning of the year 38,860 102,099

Cash and cash equivalents at the end of the year, represented by bank balances and cash 71,966 38,860

– IV-25 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 March 2015

1. GENERAL INFORMATION

Ground Properties Company Limited (the “Company”) is a limited liability company incorporated in Bermuda, its shares of which are listed on Main Board of The Stock Exchange of Hong Kong Limited. The Company is an investment holding company. The Company and its subsidiaries (together the “Group”) are principally engaged in the property investment and holding business, provision of management services for the development of properties including planning, design, budgeting, licensing, contract tendering and contract administration, trading of goods and provision of telecommunications retail sales and management services. The address of the Company’s registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The immediate holding company of the Company is Charm Success Group Limited which is incorporated in the British Virgin Islands, and is the ultimate holding company of the Company in the opinion of directors.

2. ADOPTION OF NEW/REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSS”)

Adoption of new/revised HKFRSs

The Hong Kong Institute of Certified Public Accountants (the “HKICPA”) has issued a number of new/ revised HKFRSs and Hong Kong Accounting Standards (“HKASs”) that are first effective for the current accounting period of the Group and the Company. Of these, the changes in accounting policy relevant to the Group’s financial statements are as follows:

Amendments to HKFRS 10, HKFRS 12 and HKAS 27: Investment Entities

The amendments provide consolidation relief to those parents which qualify to be an investment entity as defined in the amended HKFRS 10. Investment entities are required to measure particular subsidiaries at fair value through profit or loss. The amendments also set out the relevant disclosure requirements for investment entities. These amendments do not have an impact on these financial statements as the Company does not qualify to be an investment entity.

Amendments to HKAS 32: Presentation – Offsetting Financial Assets and Financial Liabilities

The amendments to HKAS 32 clarify the requirements for offsetting financial instruments. These amendments do not have an impact on the consolidated financial statements as they are consistent with the policies already adopted by the Group.

Amendments to HKAS 36: Recoverable Amount Disclosures for Non-Financial Assets

The amendments to HKAS 36 modify the disclosure requirements for impaired non-financial assets. Among them, additional information is required to be disclosed when the recoverable amount of impaired assets is based on fair value less costs of disposal. These amendments do not have an impact on the consolidated financial statements as the Group does not have impaired non-financial assets nor impaired asset or cash generating unit whose recoverable amount is based on fair value less costs of disposal.

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Impact of new/revised HKFRSs not yet effective

The Group has not early adopted the following new/revised standards, amendments to standards and interpretations, which are applicable to the Group and have been issued but are not yet effective for the financial year beginning on 1 April 2014.

Effective for accounting periods beginning on or after

Amendments to HKAS 19, Defined benefit plans: Employee contributions 1 July 2014 Annual improvements to HKFRSs 2010-2012 cycle 1 July 2014 Annual improvements to HKFRSs 2011-2013 cycle 1 July 2014 Annual improvements to HKFRSs 2012-2014 cycle 1 January 2016 Amendments to HKAS 16 and HKAS 38, Clarification of acceptable methods 1 January 2016 of depreciation and amortisation Amendments to HKFRS 11, Accounting for acquisitions of interest in joint 1 January 2016 operations Amendments to HKAS 1, Disclosure initiative 1 January 2016 Amendments to HKFRS 10, and HKAS 28, Sale or contribution of assets 1 January 2016 between an investor and its associate or joint venture HKFRS 15, Revenue from contracts with customers 1 January 2017 HKFRS 9, Financial instruments 1 January 2018

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it is not yet in a position to conclude whether the adoption of them will have a significant impact on the Group’s results of operations and financial position.

3. PRINCIPAL ACCOUNTING POLICIES

Basis of preparation

These consolidated financial statements have been prepared in accordance with HKFRSs, which collective term includes all applicable HKFRSs, HKASs and Interpretations issued by the HKICPA, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

These consolidated financial statements have been prepared on a basis consistent with the accounting policies adopted in the 2014 consolidated financial statements except for the adoption of the new/revised HKFRSs as set out in note 2 to the consolidated financial statements that are relevant to the Group and effective from the current year. A summary of the principal accounting policies adopted by the Group is set out below.

Basis of measurement

The measurement basis used in the preparation of these consolidated financial statements is historical cost, except for investment properties which are measured at fair value as explained in the accounting policies set out below.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries as at 31 March each year. The financial statements of the subsidiaries are prepared for the same reporting year as that of the Company using consistent accounting policies.

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra- group transactions are eliminated in full. The results of subsidiaries are consolidated from the date on which the Group obtains control and continue to be consolidated until the date that such control ceases.

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Non-controlling interests are presented, separately from owners of the parent, in the consolidated income statement and within equity in the consolidated statement of financial position. The non-controlling interests in the acquiree, that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in event of liquidation, are measured initially either at fair value or at the present ownership interest’s proportionate share in the recognised amounts of the acquiree’s identifiable net assets. This choice of measurement basis is made on an acquisition-by-acquisition basis. Other types of non-controlling interests are initially measured at fair value, unless another measurement basis is required by HKFRSs.

Allocation of total comprehensive income

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in ownership interest

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest determined at the date when control is lost and (ii) the carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests at the date when control is lost. The amounts previously recognised in other comprehensive income in relation to the disposed subsidiary are accounted for on the same basis as would be required if the parent had directly disposed of the related assets or liabilities. Any investment retained in the former subsidiary and any amounts owed by or to the former subsidiary are accounted for as a financial asset, associate, joint venture or others as appropriate from the date when control is lost.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Repairs and maintenance are charged to profit or loss during the year in which they are incurred.

Depreciation is provided to write off the cost less accumulated impairment losses of property, plant and equipment, over their estimated useful lives from the date on which they are available for use and after taking into account their estimated residual values, using the straight-line method, at the following rates per annum. Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis and depreciated separately.

Furniture, fixtures and office 10% – 20% equipment Leasehold improvements Over the unexpired term of leases Motor vehicles 20% – 30%

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Investment properties

Investment properties are land and/or building that are held by owner or lessee under finance lease, to earn rental income and/or for capital appreciation. These include properties held for a currently undetermined future use and properties that are held under operating lease, which satisfy the definition of investment property and carry at fair value.

Investment properties are stated at fair value at the end of the reporting period. Any gain or loss arising from a change in fair value is recognised in profit or loss. The fair value of investment property is based on a valuation by an independent valuer who holds a recognised professional qualification and has recent experience in the location and category of property being valued. The fair value is based on market value, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year in which the item is derecognised.

Subsidiaries

A subsidiary is an entity that is controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.

In the Company’s statement of financial position, an investment in subsidiary is stated at cost less impairment loss. The carrying amount of the investment is reduced to its recoverable amount on an individual basis, if it is higher than the recoverable amount. The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

Associates and joint venture

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but no control or joint control of those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is a contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group reassesses whether it has joint control of an arrangement and whether the type of joint arrangement in which it is involved has changed, if facts and circumstances change.

The Group’s investment in associate or joint venture is accounted for under the equity method of accounting, except when the investment or a portion thereof is classified as held for sale. Under the equity method, the investment is initially recorded at cost and adjusted thereafter for the post-acquisition changes in the Group’s share of the investee’s net assets and any impairment loss relating to the investment. Except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee, the Group discontinues recognising its share of further losses when the Group’s share of losses of the investee equals or exceeds the carrying amount of its interest in the investee, which includes any long term interests that, in substance, form part of the Group’s net investment in the investee.

Unrealised profits and losses resulting from transactions between the Group and its associates and joint venture are eliminated to the extent of the Group’s interest in the investees, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

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If an investment in a joint venture becomes an investment in an associate or vice versa, any retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method. In all other cases, on the loss of significant influence or joint control, the Group remeasures any retained interest in the former investee at fair value. The difference between the fair value of any retained investment and proceeds from disposing of the partial interest in the investee and the carrying amount of the investment at the date when significant influence or joint control is lost is recognised in profit or loss. In addition, all amounts previously recognised in other comprehensive income in respect of the former investee are accounted for on the same basis as would be required if the former investee had directly disposed of the related assets or liabilities. The fair value of the retained interest on the date of ceasing to be an associate or joint venture is regarded as the fair value on initial recognition as a financial asset.

Goodwill

Goodwill arising on an acquisition of a subsidiary is measured at the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previously held equity interest in the acquiree over the acquisition date amounts of the identifiable assets acquired and the liabilities assumed of the acquired subsidiary. Goodwill arising on an acquisition of an associate or a joint venture is measured as the excess of the cost of investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the acquired associate or joint venture.

In respect of a subsidiary, any excess of the acquisition date amounts of identifiable assets acquired and the liabilities assumed of the acquired subsidiary over the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree, if any, after reassessment, is recognised immediately in profit or loss as a bargain purchase. In respect of an associate or a joint venture, any excess of the Group’s share of its net fair value of identifiable assets and liabilities over the cost of investment is recognised immediately as income.

Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when and only when the Group becomes a party to the contractual provisions of the instruments and on a trade date basis.

A financial asset is derecognised when and only when (i) the Group’s contractual rights to future cash flows from the financial asset expire or (ii) the Group transfers the financial asset and either (a) the Group has transferred substantially all the risks and rewards of ownership of the financial asset, or (b) the Group neither transfer nor retains substantially all the risks and rewards of ownership of the financial asset but it does not retain control of the financial asset.

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A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the relevant contract is discharged, cancelled or expires.

Classification and measurement

1) Loans and receivables

Loans and receivables including bank balances and cash, pledged bank deposits, entrusted loan receivable and trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are not held for trading. They are measured at amortised cost using the effective interest method, except where receivables are interest-free loans and without any fixed repayment term or the effect of discounting would be insignificant. In such case, the receivables are stated at cost less impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition over the period to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in profit or loss.

2) Financial liabilities

The Group’s financial liabilities include trade and other payables and interest-bearing borrowings. All financial liabilities are recognised initially at their fair value and are subsequently measured at amortised cost, using effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.

Impairment of financial assets

At the end of each reporting period, the Group assesses whether there is objective evidence that financial assets are impaired. The impairment loss of financial assets carried at amortised cost is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flow discounted at the financial asset’s original effective interest rate. Such impairment loss is reversed in subsequent periods through profit or loss when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Cash equivalents

For the purpose of the consolidated statement of cash flows, cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, net of bank overdrafts.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue and costs, if applicable, can be measured reliably and on the following bases.

(i) Revenue from the sale of mobile phones, headphones, telecommunications equipment and products is recognised on the transfer of ownership, which generally coincides with the time of delivery.

(ii) Service income from telecommunications call centre services is recognised when the services are rendered.

(iii) Telecommunications retail sales and management services income and project management income are recognised when the services are rendered.

(iv) Rental income is recognised on a straight-line basis over the period of the respective leases.

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(v) Interest income from financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in the currency of Hong Kong Dollars (“HK$”), which is the Company’s functional currency.

The results and financial position of all the group entities that have a functional currency different from the presentation currency (“foreign operations”) are translated into the presentation currency as follows:

• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period.

• Income and expenses for each income statement are translated at the average exchange rates for the year.

• All resulting exchange differences arising from the above translation and exchange differences arising from a monetary item that forms part of the Group’s net investment in a foreign operation are recognised as a separate component of equity.

• On the disposal of a foreign operation, which includes a disposal of the Group’s entire interest in a foreign operation, a disposal involving the loss of control over a subsidiary that includes a foreign operation, or a partial disposal of an interest in a joint arrangement or an associate that includes a foreign operation of which the retained interest is no longer equity-accounted for, the cumulative amount of the exchange differences relating to the foreign operation that is recognised in other comprehensive income and accumulated in the separate component of equity is reclassified from equity to profit or loss when the gain or loss on disposal is recognised.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost, which comprises all costs of purchase and, where applicable, other costs that have been incurred in bringing the inventories to their present location and condition, is calculated using the first in, first out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale.

Impairment of non-financial assets, other than goodwill

At the end of each reporting period, the Group reviews internal and external sources of information to assess whether there is any indication that its property, plant and equipment may be impaired or impairment loss previously recognised no longer exists or may be reduced. If any such indication exists, the recoverable amount of the asset is estimated, based on the higher of its fair value less costs of disposal and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. a cash-generating unit).

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The accounting policy for recognition and reversal of the impairment loss for goodwill is stated in the accounting policy for goodwill in the earlier part of this note.

Leases

Rental receivable under operating leases are credited to profit or loss on a straight-line basis over the term of the relevant lease.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

Lease incentives are recognised in profit or loss as an integral part of the net consideration agreed for the use of the leased asset. Contingent rentals are recognised as expenses in the accounting period in which they are incurred.

Employee benefits

Short term employee benefits

Defined contribution plans

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for all of its employees who are eligible to participate in the MPF Scheme. Contributions are made based on the percentage of the employees’ basic salaries. Contributions are recognised as an expense in profit or loss as they incurred. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund.

The employees of the Group’s subsidiaries in the People’s Republic of China (the “PRC”) are members of state-managed retirement benefits schemes operated by the PRC government. The subsidiaries are required to contribute a certain percentage of their payroll to the retirement benefits schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefits schemes is to make the required contributions under the schemes.

Long service payments

The Group’s net obligation in respect of long service payments is the amounts of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method and discounted to its present value and after deducing the fair value of any related assets, including those retirement scheme benefits.

Share-based payment transactions

Equity-settled transactions

The Group’s employees and others providing similar services, including directors, receive remuneration in the form of share-based payment transactions, whereby the employees and others providing similar services rendered services in exchange for shares or rights over shares. The cost of such transactions with

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employees and others providing similar services is measured by reference to the fair value of the equity instruments at the grant date. The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a reserve within equity. The fair value is determined using the binomial model, taking into account the terms and conditions of the transactions, other than conditions linked to the price of the shares of the Company (“market conditions”).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the year(s) in which the vesting conditions are to be fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“vesting date”). During the vesting period, the number of share options that is expected to vest ultimately is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/credited to profit or loss for the year of the review, with a corresponding adjustment to the reserve within equity.

When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to accumulated profits.

Share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the share options granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Taxation

The charge for current income tax is based on the results for the year as adjusted for items that are non- assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, any deferred tax arising from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting profit nor taxable profit or loss is not recognised.

Deferred tax is provided on temporary differences arising on investment in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Related parties

A related party is a person or entity that is related to the Group.

(a) A person or a close member of that person’s family is related to the Group if that person:

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of the parent of the Group.

(b) An entity is related to the Group if any of the following conditions applies:

(i) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).

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(iii) Both entities are joint ventures of the same third party.

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. If the Group is itself such a plan, the sponsoring employers are also related to the Group.

(vi) The entity is controlled or jointly controlled by a person identified in (a).

(vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

Segment reporting

Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial information provided regularly to the Group’s chief operating decision maker. The Company’s Executive Directors, who are responsible for allocating resources to, and assessing the performance of, the Group’s various lines of business, have been identified as the chief operating decision makers.

Individual material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type of class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Information about other business activities that are not reportable are combined and disclosed in an “Others” category.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and assumptions concerning the future and judgements are made by the management in the preparation of the consolidated financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. Where appropriate, revisions to accounting estimates are recognised in the period of revision and future periods, in case the revision also affects future periods.

Fair value measurement

The Group’s investment properties were valued at 31 March 2015 by Savills Valuation and Professional Services Limited, an independent valuer, who hold a recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued. Management has reviewed the valuation assumptions and valuation results performed by the independent valuer when the valuation is performed.

Allowance for bad and doubtful debts

The provisioning policy for bad and doubtful debts of the Group is based on the evaluation by management of the collectability and ageing analysis of the accounts receivables. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including assessing the current creditworthiness and the past collection history of each customer. If the financial conditions of these customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance will be required. At the end of the reporting period, the carrying amount of receivables amounted to HK$28,537,000 (2014: HK$5,153,000) and no provision for impairment was made.

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Impairment of investments and receivables

The Group assesses annually if investment in subsidiaries, associates and a joint venture has suffered any impairment in accordance with HKAS 36 and follows the guidance of HKAS 39 in determining whether amounts due from these entities are impaired. Details of the approach are stated in the respective accounting policies. The assessment requires an estimation of future cash flows, including expected dividends, from the assets and the selection of appropriate discount rates. Future changes in financial performance and position of these entities would affect the estimation of impairment loss and cause the adjustments of their carrying amounts.

Impairment of goodwill

The Group determines whether goodwill on investment in subsidiaries is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units (“CGU”) to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

5. RISK MANAGEMENT OBJECTIVES AND POLICIES

(a) Financial Risk Management

The Group’s major financial instruments include trade and other receivables, trade and other payables, entrusted loan receivable, pledged bank deposits, bank balances and cash and interest- bearing borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

(i) Foreign exchange risk

The Group operates mainly in Hong Kong and the PRC and majority of transactions are denominated in HK$ and Renminbi (“RMB”). The conversion of RMB into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the PRC government. The Group has no significant direct exposure to foreign exchange risk as substantial transactions and assets and liabilities of the Group’s entities are denominated in a currency same as their functional currency. The Group currently does not have a foreign currency hedging policy in respect of foreign current assets and liabilities. The Group will monitor its foreign currency exposure closely and will consider hedging significant foreign currency exposure should the need arise.

(ii) Interest rate risk

The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s bank deposits, pledged bank deposits and interest bearing borrowings. The Group currently does not have an interest rate hedging policy. However, the management monitors interest rate exposure and will consider hedging significant interest rate exposure should the need arise.

At the end of the reporting period, if interest rates had been 200 basis point (2014: 200 basis point) higher/lower and all other variables were held constant, the Group’s loss for the year would increase/decrease by HK$2,291,000 (2014: HK$3,423,000).

– IV-36 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

Credit risk

As at 31 March 2015, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the consolidated statement of financial position.

The Group’s credit risk is primarily attributable to trade and other receivables and entrusted loan receivable. At the end of the reporting period, the Group has concentration of credit risk as the trade receivables from the five largest customers represented 100% (2014: 100%) of the total trade receivables, while 81% (2014: 97%) of the total trade receivables were due from the largest single customer.

For the entrusted loan receivable which is due from an independent third party, the Group reviews the financial information of the borrower regularly and monitor the business operation and income source of the borrower so as to ensure the borrower will have adequate and stable source of income for the repayment of the entrusted loan.

In order to minimise the credit risk, the management has credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In this regard, the management considers that the Group’s credit risk is significantly reduced.

The Company’s credit risk is primarily attributable to amounts due from subsidiaries. At the end of the reporting period, the Company is exposed to concentration of credit risk where 39% (2014: 53%) of amounts due from subsidiaries is originated from one subsidiary.

Liquidity risk

The Group manages liquidity risk by maintaining adequate bank deposits and cash, funding through both equity and debt financing, monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The maturity profile of the Group’s and the Company’s financial liabilities at the end of the reporting period based on contractual undiscounted payments are summarised below:

More than More than 2 years Within 1 1 year but but less year or on within 2 than 5 demand years years Total HK$’000 HK$’000 HK$’000 HK$’000

The Group

At 31 March 2015 Trade and other payables 39,656 – – 39,656 Interest-bearing borrowings 334,498 37,208 152,088 523,794

374,154 37,208 152,088 563,450

At 31 March 2014 Trade and other payables 17,488 – – 17,488 Interest-bearing borrowings 152,665 4,815 160,826 318,306

170,153 4,815 160,826 335,794

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More than More than 2 years Within 1 1 year but but less year or on within 2 than 5 demand years years Total HK$’000 HK$’000 HK$’000 HK$’000

The Company

At 31 March 2015 Trade and other payables 10,263 – – 10,263 Interest-bearing borrowings 129,140 37,208 152,088 318,436

139,403 37,208 152,088 328,699

At 31 March 2014 Trade and other payables 3,901 – – 3,901 Interest-bearing borrowings 152,665 4,815 160,826 318,306

156,566 4,815 160,826 322,207

As at 31 March 2014, the amounts repayable under a loan agreement that includes a clause that gives the lender the unconditional right to call the loan at any time are classified under the “on demand” bracket. In this regard, interest-bearing borrowings of HK$60,000,000 as at the end of the financial period have been so classified even though the directors do not expect that the lender would exercise its rights to demand repayment and thus these borrowings would be repaid according to the following schedule as set out in the loan agreements:

Group 2015 2014 HK$’000 HK$’000

Interest-bearing borrowings Within 1 year or on demand 319,574 85,000 1-2 years 32,000 32,000 2-5 years 146,000 178,000

497,574 295,000

Company 2015 2014 HK$’000 HK$’000

Interest-bearing borrowings Within 1 year or on demand 117,000 85,000 1-2 years 32,000 32,000 2-5 years 146,000 178,000

295,000 295,000

– IV-38 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

(b) Capital Management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The directors of the Company review the capital structure on an annual basis. As part of this review, the directors of the Company consider the cost of capital and other sources of funds. Adjustments will be made to the capital structure as necessary in response to changes in economic conditions.

The capital structure of the Group consists of equity attributable to shareholders of the Company, comprising issued capital and reserves as disclosed in the consolidated statement of changes in equity.

The Group aims at maintaining the net debt to equity ratio of not more than 80%. The net debt to equity ratio is as follows:

2015 2014 HK$’000 HK$’000

Total debt (Note a) 497,574 295,000 Less: Bank balances and cash (71,966) (38,860) Pledged bank deposits (203,326) –

Net debt 222,282 256,140

Equity (Note b) 727,816 435,917

Net debt to equity ratio 31% 59%

Notes:

(a) Total debt comprises current and non-current interest-bearing borrowings as detailed in note 27 to the consolidated financial statements.

(b) Equity represents all capital and reserves attributable to equity holders of the Company.

– IV-39 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

6. TURNOVER AND REVENUE

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are set out in note 37 to the consolidated financial statements.

The Group’s turnover and revenue recognised by category are as follows:

2015 2014 HK$’000 HK$’000

Sale of mobile phones, headphones, telecommunications equipment and products 77,005 10,589 Rental income 448 9,759 Telecommunications call centre services income 9,666 – Telecommunications retail sales and management services income 42,357 35,863 Project management income 18 –

Turnover 129,494 56,211

Interest income 10,659 2,632 Others 636 1,604

Other revenue 11,295 4,236

Total revenue 140,789 60,447

7. OTHER NET INCOME

2015 2014 HK$’000 HK$’000

Gain on disposal of property, plant and equipment – 78 Gain on disposal of subsidiaries – 13,391 Gain on disposal of club membership – 340 Bargain purchase on acquisitions of subsidiaries 989 –

989 13,809

– IV-40 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

8. SEGMENT INFORMATION

The Group manages its businesses by divisions, which are organised by a mixture of both business lines and geography. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purposes of resource allocation and performance assessment, the Group has presented the following four reportable segments. No operating segments have been aggregated to form the following reportable segments.

Operating segments Nature of business activities Place of operation

1 Telecommunications retail Sale of mobile phones, headphones, PRC sales and management telecommunications equipment services and other products and provision for (i) telecommunications call centre services; and (ii) telecommunications retail sales and management services

2 Property investment Property holding for long term Hong Kong investment and leasing purposes

3 Property development and Property development and provision PRC management of management service to property project

4 Others Other businesses including Hong Kong and PRC investment holdings

For the purpose of monitoring segment performances and allocating resources between segments:

Segment assets include all assets with the exception of bank balances and cash and other corporate assets. Segment liabilities include all liabilities with the exception of provision for taxation, deferred tax liabilities and other corporate liabilities. Those assets and liabilities not allocated to reportable segments are grouped in unallocated assets and unallocated liabilities respectively.

Revenue and expenses allocated to the reportable segments include the sales generated by the segment and the expenses incurred by the segment or which arise from the depreciation of assets attributable to those segments.

– IV-41 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

(a) Segment results and other segment information

For the year ended 31 March 2015

Tele- communications retail sales Property and development management Property and services investment management Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Turnover Revenue from external customers 129,028 448 18 – 129,494

Reportable segment revenue 129,028 448 18 – 129,494

Reportable segment results 9,310 18,329 (24,301) (19,929) (16,591)

Interest income 10,659 Finance costs (16,743) Share of results of associates – – 2,641 – 2,641 Share of results of a joint venture 429 – – – 429 Bargain purchase on acquisitions of subsidiaries 989 – – – 989

Loss before taxation (18,616) Taxation (4,103)

Loss for the year (22,719)

Assets Reportable segment assets 263,566 340,460 386,551 5,963 996,540 Unallocated assets 275,292

Total assets 1,271,832

Liabilities Reportable segment liabilities (27,971) (159) (18) (11,508) (39,656) Unallocated liabilities (504,508)

Total liabilities (544,164)

Other information Capital expenditure 506 – – 113 619 Change in fair value of investment properties – (25,000) – – (25,000) Depreciation 736 – – 439 1,175 Equity-settled share-based payment expenses 1,479 – 19,898 6,730 28,107 Significant non-cash expenses (other than depreciation and amortisation) 59–––59

– IV-42 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

For the year ended 31 March 2014

Tele- communications retail sales Property and development management Property and services investment management Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Turnover Revenue from external customers 46,452 9,759 – – 56,211

Reportable segment revenue 46,452 9,759 – – 56,211

Reportable segment results (1,852) 12,277 – (11,588) (1,163)

Interest income 2,632 Finance costs (3,747) Share of results of associates – – (1,081) – (1,081)

Loss before taxation (3,359) Taxation (497)

Loss for the year (3,856)

Assets Reportable segment assets 10,563 315,523 383,919 4,555 714,560 Unallocated assets 38,860

Total assets 753,420

Liabilities Reportable segment liabilities (8,894) (741) – (7,853) (17,488) Unallocated liabilities (300,157)

Total liabilities (317,645)

Other information Capital expenditure 519 – – 1,639 2,158 Change in fair value of investment properties – (11,000) – – (11,000) Depreciation 512 – – 250 762 Gain on disposal of subsidiaries – – – (13,391) (13,391) Gain on disposal of club membership – – – (340) (340) Significant non-cash expenses (other than depreciation and amortisation) 138 – – 237 375

– IV-43 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

(b) Geographical information

The following tables set out information about the geographical location of (i) the Group’s revenue from external customers and (ii) the Group’s property, plant and equipment, investment properties, goodwill and interests in associates and joint venture (“specified non-current assets”). The geographical location of customers is based on the location at which the services were provided or the goods delivered. The geographical location of the specified non-current assets is based on the physical location of the asset, in the case of property, plant and equipment and investment properties, and the location of operations, in the case of interests in associates and joint venture.

Revenue from external customers

2015 2014 HK$’000 HK$’000

PRC 129,046 46,452 Hong Kong 448 9,759

129,494 56,211

Specified non-current assets

2015 2014 HK$’000 HK$’000

PRC 402,488 384,893 Hong Kong 341,247 316,573

743,735 701,466

Information about major customers

For the year ended 31 March 2015, approximately HK$48,617,000 or 37.5% (2014: approximately HK$45,275,000 or 80%) of the Group’s external revenue is derived from a single customer in the telecommunications retail sales and management services segment. (Note)

Note: The single customer consists of two legal entities which are under common control.

9. FINANCE COSTS

2015 2014 HK$’000 HK$’000

Interest on bank loans repayable within five years 9,645 2,909 Interest on promissory notes 7,098 838

16,743 3,747

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10. LOSS BEFORE TAXATION

This is stated after charging (crediting):

2015 2014 Note HK$’000 HK$’000

Staff costs (including directors’ emoluments) Salaries, wages and other benefits 33,016 29,655 Equity-settled share-based payment expenses (a) 12,402 – Contributions to defined contribution plans 6,879 6,580

52,297 36,235

Auditor’s remuneration Current year 870 580 Other services 1,527 1,120 Cost of inventories 59,409 9,920 Depreciation 1,175 762 Operating lease charges on premises 8,685 8,342 Write off of doubtful trade and other receivables 54 138 Loss (Gain) on disposal of property, plant and equipment 5 (78) Equity-settled share-based payment expenses (a) 28,107 – Exchange loss, net – 24 Direct operating expenses arising from investment properties that generated rental income 89 2,203 Direct operating expenses arising from investment properties that did not generate rental income 2,405 62

Note:

(a) The equity-settled share-based payment expenses represent the fair value of 84,350,000 share options granted during the year and results in total equity-settled share-based payment expenses of HK$28,107,000, among which, 48,350,000 share options were granted to the directors and employees of the Group with an aggregate fair value of HK$12,402,000 that has been included in staff costs.

– IV-45 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

11. DIRECTORS’ AND SENIOR MANAGEMENT’S EMOLUMENTS

The aggregate amounts of emoluments received or receivable by the Company’s directors are as follows:

Salaries, Equity- allowances Retirement settled Directors’ and benefits Discretionary scheme share-based fees in kinds Bonus contributions payment Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

2015 Executive Directors: Chai Xiu – 4,145 – 18 427 4,590 Cong Hongsong (a) – 514 – 15 696 1,225 Huang Bingxing (b) – 120 – – 998 1,118 Wang Guanghui (b) – 100 – – 374 474 Chen Luhui (c) – 1,028 – 15 3,369 4,412

Non-executive Directors: Chen Luhui (c) 40–––649689 Ting Pang Wan, Raymond (d) 36––––36

Independent Non-executive Directors: Chan Yuk Tong 240 – – – 427 667 Mei Jianping 240 – – – 427 667 Nie Meisheng(e) 144 – – – 427 571 Wei Lidong (b) 40––––40

740 5,907 – 48 7,794 14,489

2014 Executive Directors: Chai Xiu – 1,450 – 6 – 1,456 Cong Hongsong – 203 – 5 – 208 Chen Luhui – 407 – 5 – 412 Ting Pang Wan, Raymond – 1,401 – 10 – 1,411 Ji Zuguang – 1,040 270 15 – 1,325

Non-executive Director: Ting Pang Wan, Raymond 34––––34

Independent Non-executive Directors: Chan Yuk Tong 81––––81 Mei Jianping 81––––81 Nie Meisheng 81––––81 SinKaMan66––––66 Huang An Guo 66––––66 WongFeiTat66––––66

475 4,501 270 41 – 5,287

– IV-46 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

Notes:

(a) Resigned on 1 February 2015. (b) Appointed on 1 February 2015. (c) Re-designated from an Executive Director to a Non-executive Director on 1 February 2015. (d) Retired on 8 August 2014. (e) Resigned on 6 November 2014.

In addition to the above emoluments, certain directors and employees of the Company or its subsidiaries were granted share options under the share option scheme adopted by the Company. Details of the share options granted by the Company to the individuals are disclosed in note 30.

No directors have waived emoluments in respect of the years ended 31 March 2015 and 2014.

The five individuals whose emoluments were the highest in the Group for the year include four directors (2014: three) whose emoluments are reflected in the analysis presented above. Details of the emoluments of the remaining one individual (2014: two) are as follows:

2015 2014 HK$’000 HK$’000

Salaries, allowances and benefits in kinds 1,023 2,014 Discretionary bonus – 1,162 Retirement scheme contributions 18 24 Equity-settled share-based payment 436 –

1,477 3,200

The emoluments were paid to individuals as follows:

Emoluments band Number of individuals 2015 2014

Nil to HK$1,000,000 – – HK$1,000,000 to HK$1,500,000 1 – HK$1,500,000 to HK$2,000,000 – 2

12. TAXATION

No provision for Hong Kong Profits Tax has been made in the consolidated financial statements for both years as the Group has no assessable profit arising in Hong Kong or Hong Kong taxable profits were wholly absorbed by estimated tax losses brought forward.

PRC Enterprise Income Tax (“EIT”) has been provided for based on the estimated assessable profits in accordance with the relevant tax laws applicable to the subsidiaries in the PRC. The statutory EIT rate in the PRC is 25% (2014: 25%).

Pursuant to the PRC EIT Law, a 10% withholding tax is levied on dividends distributed to foreign investors by the foreign investment enterprises established in the PRC. The requirement is effective from 1 January 2008 and applies to earnings accumulated after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between PRC and jurisdiction of the foreign investors. A lower 5% withholding tax rate may be applied when the immediate holding company of the PRC subsidiaries is a resident company in Hong Kong according to the tax treaty arrangement between the PRC and Hong Kong for avoidance of double taxation.

– IV-47 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

The post 2007 earnings are not expected to be distributed in the foreseeable future and they are subject to additional taxation if they are distributed. The estimated withholding tax effects on the distribution of these unremitted retained earnings of these PRC subsidiaries and the joint venture were approximately of HK$1,647,000 (2014: HK$556,000). In the opinion of the directors, these retained earnings, at the present time, are required for financing the continuing operations of the PRC subsidiaries and the joint venture and no distribution would be made in the foreseeable future. Accordingly, no provisions for deferred taxation have been made. For the Group’s interests in associates, since all PRC associates have not yet generated any profit, there are no unremitted retained earnings subject to withholding tax.

The major components of income tax charged to the consolidated income statement are:

2015 2014 Note HK$’000 HK$’000

Current tax PRC Enterprise Income Tax Current year 4,103 171 Under provision in prior year – 7

4,103 178

Deferred taxation Origination and reversal of temporary difference 28 – 319

Total tax charge for the year 4,103 497

Reconciliation of tax expense

2015 2014 HK$’000 HK$’000

Loss before taxation (18,616) (3,359)

Income tax at applicable tax rates (3,072) (554) Non-deductible expenses 10,413 2,518 Tax exempt revenue (8,782) (4,643) Utilisation of previously unrecognised tax losses – (21) Tax effect of unused tax losses not recognised 3,574 3,150 Under provision in prior years – 7 Unrecognised temporary differences 71 156 Effect on overseas tax rates differences 1,991 (29) Others (92) (87)

Tax charge for the year 4,103 497

The applicable tax rate is the Hong Kong profits tax rate of 16.5% (2014: 16.5%).

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13. LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY

The consolidated loss attributable to shareholders of the Company included a loss of HK$25,953,000 (2014: HK$16,749,000) which has been dealt with in the financial statements of the Company.

Reconciliation of the above amount to the Company’s loss:

2015 2014 HK$’000 HK$’000

Amount of consolidated loss attributed to shareholders of the company dealt with in the Company’s financial statements (25,953) (16,749) Reversal of allowance for amount due from subsidiaries 5,061 4,094

Company’s loss for the year (Note 31) (20,892) (12,655)

14. LOSS PER SHARE

The calculation of basic and diluted loss per share is based on the following data:

(a) Number of shares

2015 2014

Issued ordinary shares at the beginning of the year 570,630,000 564,100,000 Effect of share options exercised 1,670,000 694,493 Issue of new shares 241,362,904 –

Weighted average number of ordinary shares for the purpose of basic loss per share 813,662,904 564,794,493

Effect of dilutive potential ordinary shares: Share options issued by the Company – –

Weighted average number of ordinary shares for the purpose of diluted loss per share 813,662,904 564,794,493

(b) Loss per share for the year:

Loss attributable to shareholders of the Company (HK$’000) (22,713) (3,850)

Diluted loss per share for the years ended 31 March 2015 and 31 March 2014 are the same as the basic loss per share because share option in issue have no dilutive effect and there are no dilutive potential ordinary shares in existence.

During the year ended 31 March 2015, the Company completed its share consolidation of every five shares of HK$0.01 each in the issued and unissued share capital into one share of HK$0.05. Such share consolidation has been reflected in the calculation of the weighted average number of ordinary shares for the purpose of basic loss per share for all periods presented.

– IV-49 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

15. INVESTMENT PROPERTIES

Group 2015 2014 HK$’000 HK$’000

At fair value At the beginning of the year 315,000 304,000 Change in fair value 25,000 11,000

At the end of the year 340,000 315,000

Investment properties of the Group are situated in Hong Kong and are held under the medium term lease.

As at 31 March 2015 and 2014, the investment properties were revalued by Savills Valuation and Professional Services Limited, which is an independent professional qualified valuer, on the open market value basis using direct comparison approach.

The Group’s investment properties with an aggregate carrying value at the end of the reporting period of HK$340,000,000 (2014: HK$315,000,000) were pledged to secure the Company’s bank loans as set out in note 27 to the consolidated financial statements.

16. PROPERTY, PLANT AND EQUIPMENT

Furniture, fixtures and office Leasehold Motor equipment improvements vehicles Total HK$’000 HK$’000 HK$’000 HK$’000

Reconciliation of carrying amount – year ended 31 March 2014 At the beginning of the year 727 172 520 1,419 Additions 1,715 306 137 2,158 Disposals (253) (1) (14) (268) Depreciation (281) (192) (289) (762) Exchange differences (4) 1 3 –

At the end of the year 1,904 286 357 2,547

Reconciliation of carrying amount – year ended 31 March 2015 At the beginning of the year 1,904 286 357 2,547 Additions 619 – – 619 Acquisitions of subsidiaries 1,346 2,121 1,181 4,648 Disposals (5) – – (5) Depreciation (619) (302) (254) (1,175) Exchange differences 54 (15) (67) (28)

At the end of the year 3,299 2,090 1,217 6,606

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Furniture, fixtures and office Leasehold Motor equipment improvements vehicles Total HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2014 Cost 5,871 6,921 2,751 15,543 Accumulated depreciation (3,967) (6,635) (2,394) (12,996)

1,904 286 357 2,547

At 31 March 2015 Cost 5,390 9,027 2,649 17,066 Accumulated depreciation (2,091) (6,937) (1,432) (10,460)

3,299 2,090 1,217 6,606

17. GOODWILL

Group 2015 2014 HK$’000 HK$’000

Reconciliation of carrying amount At the beginning of the year – – Impairment loss ––

At the end of the year ––

Cost 119,756 119,756 Accumulated impairment losses (119,756) (119,756)

––

As at 31 March 2013, the directors of the Company assessed the recoverable amount of the cash generating units (“CGU”) of the telecommunications retail sales and management services in Shanghai from value in use calculations and its operating results and determined that goodwill associated with the CGU was fully impaired.

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18. INTERESTS IN SUBSIDIARIES

Company 2015 2014 HK$’000 HK$’000

Unlisted shares, at cost 113,115 113,115 Impairment loss (113,115) (113,115)

––

Due from subsidiaries 1,816,069 1,561,088 Allowance for doubtful debts (824,960) (830,021)

991,109 731,067

Due to subsidiaries – (600)

991,109 730,467

The amounts due from (to) subsidiaries are unsecured, interest-free and have no fixed term of repayment but repayment is not expected to be within twelve months from the end of the reporting period. The carrying amounts of the amounts due approximate their fair values.

Particulars of the Company’s principal subsidiaries at the end of the reporting period, which in the opinion of the directors principally affect the results for the year or form a substantial portion of the net assets, are set out in note 37 to the consolidated financial statements.

19. INTERESTS IN ASSOCIATES

Group 2015 2014 HK$’000 HK$’000

Investment cost 385,000 385,000 Share of post-acquisition changes in net assets 1,532 (1,081)

386,532 383,919

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Details of the Group’s principal associates at the end of the reporting period are as follows:

Principal place of business Proportion of and place of Registered registered capital Name of associates incorporation capital held by the Group Principal activity 2015 2014

吉林省廣澤旅遊開發有限公司 PRC RMB10,000,000 35% 35% Investment holding Jilin Ground Tourism Investment Co., Ltd

撫松長白山廣澤旅遊開發 PRC RMB10,000,000 35% 35% Development of 有限公司 travel related Fusong Changbaishan Guangze projects Tourism Development Company Limited#

撫松廣澤房地產開發有限公司 PRC RMB10,000,000 35% 35% Properties Fusong Guangze Real Estate development Development Company Limited#

# English translation for identification purposes only.

Relationship with associates

Jilin Ground Tourism Investment and its subsidiaries (“Jilin Ground Group”) are PRC companies with a scope of business being consultation of tourism information, development of tourism products and management of tourism projects. Having associates in the Group, the management has viewed it as a business opportunity to enter into the PRC property market and to gain experience in property management project through active involvement in a property development project as project manager.

Financial information of material associates

The following table illustrates the summarised financial information of Jilin Ground Group which is prepared using the same accounting policies as those adopted by the Group and has been adjusted to reflect the fair value of identifiable assets and liabilities of Jilin Ground Group by the Group and reconciled to the carrying amount in the consolidated financial statements.

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At 31 March At 31 March 2015 2014 HK$’000 HK$’000

Gross amount Current assets 3,747 5,990 Non-current assets 1,658,988 1,613,202 Current liabilities (565,496) (529,421) Non-current liabilities (281,341) (281,341)

Equity 815,898 808,430

Reconciliation Gross amount of equity 815,898 808,430

Group’s ownership interests and voting rights 35% 35%

Group’s share of equity 285,564 282,951 Goodwill 100,968 100,968

Carrying amount of interests 386,532 383,919

Year ended Year ended 31 March 31 March 2015 2014 HK$’000 HK$’000

Gross amount Revenue ––

Profit/(Loss) from operations 7,545 (3,088) Other comprehensive income (78) –

Total comprehensive income 7,467 (3,088)

20. INTERESTS IN A JOINT VENTURE

Group 2015 2014 HK$’000 HK$’000

Investment cost 10,168 – Share of post-acquisition changes in net assets 429 –

10,597 –

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Details of the Group’s joint venture at the end of the reporting period are as follows:

Principal place of business Proportion of and place of Registered registered capital Name of joint venture incorporation capital held by the Group Principal activity 2015 2014

上海新華匯訊通信設備銷售 PRC RMB10,000,000 55% – Provision of retail 有限公司 sales and Shanghai Xinhua Motion management Communication Technology services Company Limited# (“Shanghai Xinhua Motion”)

# English translation for identification purpose only.

Relationship with Shanghai Xinhua Motion

Shanghai Xinhua Motion is a company engaging in retail network, selling of telecommunication and mobile products to end users. The Group has adjusted its strategies to enhance the profitability of the business based on the trends in the development of the telecommunications industry. The Group also seeks for the opportunities to cooperate with other telecommunications operators to further expand its telecommunications business and capitalise on its channel advantage for further expand the retailing of electronic products, such as mobile accessories.

Significant judgement and assumptions

The Group has 55% equity holdings in Shanghai Xinhua Motion and the remaining 45% was held by another joint venture partner. Based on the memorandum of articles of Shanghai Xinhua Motion, the relevant activities which significantly affects the investee’s return required the approval of two-thirds equity voting. Therefore, the Group determined that it has no unilateral control but joint control over Shanghai Xinhua Motion.

The joint arrangement is structured as limited company and provides the Group and the joint venture party with rights to the net assets of the limited company under the arrangement. Therefore, Shanghai Xinhua Motion is classified as joint venture of the Group.

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Financial information of a joint venture

The following table illustrates the summarised financial information of Shanghai Xinhua Motion which is prepared using the same accounting policies as those adopted by the Group and has been adjusted to reflect the fair value of identifiable assets and liabilities of Shanghai Xinhua Motion at the completion date of acquisition by the Group and reconciled to the carrying amount in the consolidated financial statements.

At 31 March 2015 HK$’000

Gross amount Current assets 29,554 Non-current assets 73 Current liabilities (10,360)

Equity 19,267

Reconciliation Gross amount of equity 19,267

Group’s ownership interests and voting rights 55%

Group’s share of equity 10,597

Carrying amount of interests 10,597

Include in above Cash and cash equivalent 25,096 Current financial liabilities* – Non-current financial liabilities* –

* Exclude trade and other payables and provision

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From the date of acquisition to 31 March 2015 HK$’000

Gross amount Revenue 24,497

Profit from operations 780 Other comprehensive income –

Total comprehensive income 780

Include in above Depreciation and amortization 12 Interest income 44 Interest expenses – Income tax income – Income tax expenses 524

21. INVENTORIES

Group 2015 2014 HK$’000 HK$’000

Finished goods 30,859 1,580

22. TRADE AND OTHER RECEIVABLES

Group Company 2015 2014 2015 2014 Note HK$’000 HK$’000 HK$’000 HK$’000

Trade receivables Trade receivables from third parties (a) 28,537 5,153 – – Other receivables Deposits, prepayments and other receivables 13,579 15,687 1,864 176 Allowance for doubtful debts (b) – (9,326) – –

13,579 6,361 1,864 176

42,116 11,514 1,864 176

Notes:

(a) Trade receivables

The Group has established credit policies for customers in each of its core businesses. The average credit period granted for trade receivables ranges from 30 to 60 days. The carrying amount of the amounts due approximates their fair values. No allowance for doubtful debts has been made.

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The ageing analysis of the trade receivables (net of allowance for doubtful debts) by dates of invoices as at the end of the reporting period is as follows:

Group 2015 2014 HK$’000 HK$’000

0 – 30 days 18,860 2,879 31 – 60 days 5,621 2,052 61 – 90 days 4,038 150 Over 90 days 18 72

28,537 5,153

Receivables that are neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

Included in the Group’s trade receivable balance are debtors with a carrying amount of HK$4,056,000 (2014: HK$222,000), which are past due at the end of the reporting period for which the Group has not impaired as there has not been a significant change in credit quality and the directors consider that the amounts are recoverable. The Group does not hold any collateral over these balances.

The ageing of trade receivables which are past due but not impaired are as follows:

Group 2015 2014 HK$’000 HK$’000 Past due for 0 – 30 days 4,038 – 31 – 60 days – – 61 – 90 days – 150 over 90 days 18 72

4,056 222

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable.

(b) Allowance for doubtful debts – Other receivables

Group 2015 2014 HK$’000 HK$’000

Balance at the beginning of the year 9,326 9,326 Amount written off (9,326) –

Balance at the end of the year – 9,326

23. ENTRUSTED LOAN RECEIVABLE

On 25 September 2014, a wholly-owned subsidiary of the Company entered into a memorandum of understanding to acquire the entire equity interest in a property development company in the PRC from independent third parties.

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In addition, the wholly-owned subsidiary entered into an entrusted loan agreement with this property development company in the PRC (the “Borrower”) to grant a loan to the Borrower in the principal amount of RMB143,900,000 (equivalent to approximately HK$179,830,000) through a bank in the PRC. The purpose of the entrusted loan was for the construction cost of residential units relating to property development at a property project and the potential property project to be developed by the Borrower.

The original entrusted loan was for an initial period of 6 months from 26 September 2014 with an interest rate of 10% per annum. On 25 March 2015, an entrusted loan extension agreement was signed among the Borrower, the bank and the Group that the maturity date of the loan was extended to 26 September 2015. The entrusted loan is secured by share charge over the 100% equity interest of the Borrower pursuant to a deed of guarantee dated 25 September 2014, and the account receivable balance generated from the sale of the property development project of the Borrower. The entrusted loan is neither past due nor impaired.

An amount of RMB143,900,000 (equivalent to approximately HK$179,830,000) out of the total amount of pledged bank deposits of HK$203,326,000 has been used to secure the entrusted bank loan shown in note 27 in order to facilitate the entrusted loan receivable.

24. PLEDGED BANK DEPOSITS

The pledged bank deposit of RMB143,900,000 (equivalent to approximately HK$179,830,000) is pledged as cash collateral for the entrusted loan obtained from a bank in the PRC, which was used to finance the entrusted loan receivable made to an independent third party. The details of which are set out in note 23 and note 27(b)(iv) to the consolidated financial statements.

The short-term pledged bank deposit of RMB18,800,000 (equivalent to approximately HK$23,496,000) is pledged as cash collateral for the operation to a wholly-owned subsidiary in the PRC as trust receipt loan, details of which are set out in note 27(b)(iii) to the consolidated financial statements.

All pledged bank deposits earn interest income at a prevailing rate as published by the People’s Bank of China.

Pledged bank deposits in terms of currencies (expressed in Hong Kong dollars) are as follows:

Group 2015 2014 HK$’000 HK$’000

RMB 203,326 –

25. BANK BALANCES AND CASH

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods between one day and three months, depending on the immediate cash requirement of the Group, and earn interest at the respective short-term deposit rates.

Bank balances and cash in terms of currencies (expressed in Hong Kong dollars) are as follows:

Group Company 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000

HK$ 6,495 5,107 2,317 2,110 RMB 64,553 32,839 37,630 161 Others 918 914 – –

71,966 38,860 39,947 2,271

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26. TRADE AND OTHER PAYABLES

Group Company 2015 2014 2015 2014 Note HK$’000 HK$’000 HK$’000 HK$’000

Trade payables (a) 20,443 757 – –

Other payables Accrued charges and other creditors 19,094 13,532 10,263 3,901 Deposits received 119 619 – – Due to a related party (b) – 2,580 – –

19,213 16,731 10,263 3,901

39,656 17,488 10,263 3,901

Notes:

(a) Trade payables

The ageing analysis of trade payables from the date of invoices as at the end of the reporting period is as follows:

Group 2015 2014 HK$’000 HK$’000

0 – 30 days 19,332 273 31 – 60 days 286 116 61 – 90 days 170 80 Over 90 days 655 288

20,443 757

(b) Due to a related party

As at 31 March 2014, the amount due to a related party was unsecured, interest-free and had no fixed repayment term. The related party is an entity controlled by a close family member of a controlling shareholder of the Company.

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27. INTEREST-BEARING BORROWINGS

(a) The security and maturity of the interest bearing borrowings are analysed as follows:

Group Company 2015 2014 2015 2014 HK$’000 HK$’000 HK$’000 HK$’000

Secured 412,574 210,000 210,000 210,000 Unsecured 85,000 85,000 85,000 85,000

497,574 295,000 295,000 295,000

Amount repayable: Within one year 319,574 85,000 117,000 85,000 In the second year 32,000 32,000 32,000 32,000 In the third to fifth years, inclusive 146,000 178,000 146,000 178,000

497,574 295,000 295,000 295,000 Portion classified as current liabilities (319,574) (145,000) (117,000) (145,000)

Non-current portion 178,000 150,000 178,000 150,000

(b) At 31 March 2015, the interest-bearing borrowings consist of the followings.

Group Company 2015 2014 2015 2014 Note HK$’000 HK$’000 HK$’000 HK$’000

Secured bank loans (i) 210,000 210,000 210,000 210,000 Unsecured promissory notes (ii) 85,000 85,000 85,000 85,000 Trust receipt loan (iii) 22,744 – – – Entrusted loan (iv) 179,830 – – –

497,574 295,000 295,000 295,000

Notes:

(i) Secured bank loans of HK$210,000,000 (2014: HK$210,000,000) are secured by the investment properties of the Group (Note 15).

The secured bank loans bear interest at HIBOR plus 3% per annum. According to the repayment schedule stated in the loan agreement, an amount of HK$32,000,000 is repayable within one year which is classified under current liabilities as at 31 March 2015.

Included in secured bank loans as at 31 March 2014, an amount of HK$60,000,000 was repayable on demand and was classified as interest bearing borrowings under current liabilities. During the financial year ended 31 March 2015, the bank confirmed in writing that the bank will not demand for repayment on the amount of HK$60,000,000 and such amount will not be repayable within the next 12 months. Thus, such portion of loan balance has been re-classified as interest-bearing borrowings under non-current liabilities.

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(ii) The unsecured promissory notes of HK$85,000,000 issued by the Company on 29 October 2013 were part of the purchase consideration in connection with the acquisition of the entire equity interest in Ace Plus Global Limited and its subsidiaries in October 2013.

The promissory notes are unsecured and bear interest at rates ranging from 4% to 12% per annum depending on the repayment date of the principal amount(s). The initial maturity date of the promissory notes was 28 October 2014 with an option to extend for a further period of one year. During the year ended 31 March 2015, the Company extended the repayment date of the promissory notes to 28 October 2015.

(iii) The trust receipt loan of RMB18,200,000 (approximately of HK$22,744,000) is secured by a bank deposit of RMB18,800,000 (approximately of HK$23,496,000) made with a bank in the PRC. This loan bears interest at a fixed rate of 2.885% per annum and is repayable in August 2015.

(iv) The entrusted loan of RMB143,900,000 (approximately of HK$179,830,000) is secured by a bank deposit of RMB143,900,000 (approximately of HK$179,830,000) made with a bank in the PRC for the purpose of the entrusted loan receivable made to an independent third party (Note 23).

The loan bears an interest at a prevailing rate as published by the People’s Bank of China minus 3.12%. The entrusted loan is repayable on 24 September 2015.

All of the banking facilities are subject to the fulfillment of covenants relating to certain of the Group’s statement of financial position ratios, as are commonly found in lending arrangements with financial institutions. If the Group was to breach the covenants the drawn down facilities would become repayable on demand.

The Group regularly monitors its compliance with these covenants, is up to date with the scheduled repayments of the term loans and does not consider it probable that the bank will demand repayment for so long as the Group continues to meet these requirements. Further details of the Group’s management of liquidity risk are set out in note 5. As at 31 March 2015, none of the covenants relating to drawn down facilities had been breached (2014: Nil).

28. DEFERRED TAXATION

The movement for the year in the Group’s net deferred tax position is as follows:

Recognised deferred tax liabilities

Accelerated depreciation allowances HK$’000

At 1 April 2013 4,780 Charged to profit or loss 319

At 31 March 2014 5,099

At 1 April 2014 5,099 Charged to profit or loss –

At 31 March 2015 5,099

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Unrecognised deferred tax assets arising from

Group 2015 2014 HK$’000 HK$’000

Deductible temporary differences 901 1,331 Tax losses 355,136 350,222

At the end of the year 356,037 351,553

The Group has not recognised deferred tax assets in respect of tax losses and deductible temporary differences as it is not probable that future taxable profits will be available against which the Group can utilise the benefits therefrom. The tax losses do not expire under current tax legislation.

29. SHARE CAPITAL

2015 2014 No. of shares HK$’000 No. of shares HK$’000

Ordinary shares of HK$0.01 each

Authorised: Ordinary shares of HK$0.01 each as at 1 April 2014/2013 (Note (i)) 78,000,000,000 780,000 78,000,000,000 780,000 Share consolidation for every 5 shares of HK$0.01 into 1 consolidated share of HK$0.05 each (Note (ii)) (62,400,000,000) – – –

Ordinary shares of HK$0.05 each as at 31 March (2014: HK$0.01 each) 15,600,000,000 780,000 78,000,000,000 780,000

Issued and fully paid: Ordinary shares of HK$0.01 each as at 1 April 2014/2013 2,853,150,000 28,532 2,820,500,000 28,205 Exercise of share options (Note 30) (Note (i)) 8,350,000 84 32,650,000 327 Share consolidation for every 5 shares of HK$0.01 into 1 consolidated share of HK$0.05 each (Note (ii)) (2,289,200,000) – – – Open offer of HK$0.05 each (Note (iii)) 286,150,000 14,307 – –

Ordinary shares of HK$0.05 each as at 31 March (2014: HK$0.01 each) 858,450,000 42,923 2,853,150,000 28,532

Notes:

(i) The number of shares was presented as before the Share Consolidation.

(ii) Pursuant to the share consolidation that came into effect on 15 May 2014, every five issued and unissued shares of HK$0.01 each were consolidated into one consolidated share of HK$0.05 each (defined as “Share Consolidation”).

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(iii) On 28 May 2014, the open offer was completed. The subscription price for the open offer is HK$1.00 per consolidated share, and which an amount of approximately HK$271,843,000 was created in the share premium account. The number of shares issued pursuant to the open offer was, therefore, presented as after the Share Consolidation. The net proceeds from the open offer not more than HK$244,000,000 is mainly applied to Group’s property development and management business and the remaining balance for general working capital purposes.

30. EQUITY-SETTLED SHARE-BASED TRANSACTIONS

The Company adopted a share option scheme on 6 September 2002 with scheme limit refreshed on 23 September 2009, which was terminated on 5 September 2012 (the “2002 Share Option Scheme”). Pursuant to the unconditional mandatory cash offer, all the remaining unexercised share options granted under the 2002 Share Option Scheme were lapse and became null and void effective from 6 May 2014 (i.e. 6 calendar months after the date on which the Option Offer was made).

A new share option scheme (the “2012 Share Option Scheme”) was adopted by the shareholders of the Company at the Company’s annual general meeting on 5 September 2012 with scheme limit refreshed on 8 August 2014.

The terms and conditions of the share options granted under the 2012 Share Option Scheme and the 2002 Share Option Scheme were as follows:

2012 Share Option Scheme

Number of share options Outstanding Outstanding and and exercisable Cancelled/ exercisable Exercise as at Granted Exercised lapsed as at price per 1 April during the during the during the 31 March Date of share Grantee 2014 year year year 2015 grant Exercise period option HK$

Directors: Ms. Chai Xiu – 850,000 – – 850,000 19/06/2014 19/06/2014–18/06/2024 0.980 Mr. Wang Guanghui – 1,500,000 – – 1,500,000 24/10/2014 24/10/2015–23/10/2024 1.200 – 1,500,000 – – 1,500,000 24/10/2014 24/10/2016–23/10/2024 1.200 Mr. Huang Bingxing – 4,000,000 – – 4,000,000 24/10/2014 24/10/2015–23/10/2024 1.200 – 4,000,000 – – 4,000,000 24/10/2014 24/10/2016–23/10/2024 1.200 Mr. Cong Hongsong (Note 1) – 1,000,000 – (1,000,000) – 19/06/2014 19/06/2014–18/06/2024 0.980 – 250,000 – (250,000) – 24/10/2014 24/10/2015–23/10/2024 1.200 – 250,000 – (250,000) – 24/10/2014 24/10/2016–23/10/2024 1.200 Mr. Chen Luhui – 8,000,000 – – 8,000,000 19/06/2014 19/06/2014–18/06/2024 0.980 Mr. Chan Yuk Tong – 850,000 – – 850,000 19/06/2014 19/06/2014–18/06/2024 0.980 Mr. Mei Jianping – 850,000 – – 850,000 19/06/2014 19/06/2014–18/06/2024 0.980 Ms. Nie Meisheng (Note 1) – 850,000 – (850,000) – 19/06/2014 19/06/2014–18/06/2024 0.980

Sub-total – 23,900,000 – (2,350,000) 21,550,000

Employees – 2,300,000 – (1,000,000) 1,300,000 19/06/2014 19/06/2014–18/06/2024 0.980 – 11,075,000 – (1,600,000) 9,475,000 24/10/2014 24/10/2015–23/10/2024 1.200 – 11,075,000 – (1,600,000) 9,475,000 24/10/2014 24/10/2016–23/10/2024 1.200 Others (Note 2) – 36,000,000 – – 36,000,000 19/06/2014 19/06/2014–18/06/2024 0.980

Sub-total – 60,450,000 – (4,200,000) 56,250,000

Total – 84,350,000 – (6,550,000) 77,800,000

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2002 Share Option Scheme

According to the 2002 Share Option Scheme and the unconditional mandatory cash offers for, inter alia, cancellation of all the outstanding share options of the Company (the “Option Offer”) made by Charm Success Group Limited under the Hong Kong Code on Takeovers and Mergers, all the share options remaining unexercised will lapse and become null and void and of no further effect on 6 May 2014 (i.e. 6 calendar months after the date on which the Option Offer was made).

Employees 6,370,000 – (6,370,000) – – 10/08/2009 10/08/2009–09/08/2019 0.182 1,980,000 – (1,980,000) – – 29/09/2009 29/09/2009–28/09/2019 0.160

Total 8,350,000 – (8,350,000) – –

Notes:

1. The 1,500,000 and 850,000 share options granted to former directors, Mr. Cong and Ms. Nie, lapsed in March 2015 and December 2014 respectively (i.e. 1 month following the date of cessation as qualified person) as a result of their resignation pursuant to the 2012 Share Option Scheme.

2. Others include the persons providing similar services as employees.

In respect of share options of the Company granted to the directors of the Company, the related charge recognised in the consolidated income statement for the year ended 31 March 2015 and 2014, estimated in accordance with the Group’s accounting policy in note 3, was as follows:

Group 2015 2014 HK$’000 HK$’000

Ms. Chai Xiu 427 – Mr. Chen Luhui 4,018 – Mr. Cong Hongsong 696 – Mr. Huang Bingxing 998 – Mr. Wang Guanghui 374 – Mr. Chan Yuk Tong 427 – Mr. Mei Jianping 427 – Ms. Nie Meisheng 427 –

7,794 –

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The fair values of options granted during the year ended 31 March 2015 were approximately HK$22,936,000 and HK$13,028,000 which were determined at the grant date using the Binomial Model. Other than the exercise price mentioned above, significant judgement on parameters, such as risk free rate, dividend yield and expected volatility, is required in applying Binominal Model, which is summarized as below:

Date of grant 19/6/2014 24/10/2014

Weighted average share price at the grant date 0.98 0.91 Risk free rate 2.02% 1.75% Dividend yield 0% 0% Expected volatility* 49.89% 49.12%

* Based on property development listed companies.

The weighted average exercise prices of share options outstanding as at 31 March 2015 and 2014 are as follows:

2015 2014 Weighted Weighted average average exercise exercise price in Number price in Number HK$ per of share HK$ per of share share options share options (‘000) (‘000)

At the beginning of the year 0.1768 (i) 8,350 0.1733(i) 61,000 Granted 1.0678(ii) 84,350 – – Exercised 0.1768 (i) (8,350) 0.1724(i) (32,650) Lapsed 1.0371(ii) (6,550) 0.1768(i) (20,000)

At the end of the year 1.0692(ii) 77,800 0.1768(i) 8,350

The weighted average share price at the date of share options exercised was HK$1.08 (ii) (2014: HK$0.28(i)).

Terms of unexpired and unexercised share options at the end of the reporting period

Exercise Exercise period price 2015 2014 Numbers Numbers

10/08/2009 – 09/08/2019 – 6,370,000 29/09/2009 – 28/09/2019 – 1,980,000 19/06/2014 – 18/06/2024 0.98 47,850,000 – 24/10/2015 – 23/10/2024 1.20 14,975,000 – 24/10/2016 – 23/10/2024 1.20 14,975,000 –

77,800,000 8,350,000

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Notes:

(i) The number of share and average exercise price were presented as before the effect of Share Consolidation.

(ii) The number of share and average exercise price were presented as after the effect of Share Consolidation.

(iii) Of the total number of lapsed share options, 2,350,000 share options were granted to former directors and the remaining 4,200,000 shares options were granted to employees and others providing similar services.

Summary of the 2012 Share Option Scheme is as follows:

1) Purpose To recognise and acknowledge the contributions or potential contributions made or to be made by the participant to the Group or any entity in which the Group holds any equity interests (the “Invested Entity”), to motivate the participants to optimise their performance and efficiency for the benefit of the Group or the Invested Entity, and to maintain or attract business relationship with the participants whose contributions are or may be beneficial to the growth of the Group or the Invested Entity.

2) Participants (a) any employee (including any executive director) or officer (including any non-executive director and independent non-executive director) or substantial shareholder of the Company or any subsidiary or any Invested Entity; or

(b) any consultant, agent, professional adviser, customer, business partner, joint venture partner, strategic partner, landlord or tenant of, or any supplier or provider of goods or services to, the Company or any subsidiary or any Invested Entity; or

(c) any trustee(s) of a discretionary trust of which one or more beneficiaries belong to any of the abovementioned category(ies) of persons, or any company beneficially owned by any of the abovementioned category(ies) of persons; or

(d) any other person who, the Board may determine in its absolute discretion, has made valuable contribution to the business of the Group or Invested Entity based on his performance and/or years of service, or is regarded as valuable resources of the Group or the Invested Entity based on his work experience, knowledge in the industry and other relevant factors, or is expected to be able to contribute to the prosperity, business development or growth of the Group or the Invested Entity based on his/its business connection or network or other relevant factors.

3) Total number 85,845,000 shares, being 10% of the total numbers of shares in issue as at the of shares date of refreshment of scheme mandate limit on 8 August 2014. available for issue

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4) Maximum In any 12-month period: entitlement of each (a) for each grantee, not exceeding 1% of the aggregate number of shares participant for the time being in issue (including both exercised and outstanding options);

(b) for substantial shareholders and independent non-executive directors, not over 0.1% of the number of shares then in issue and not having aggregate value in excess of HK$5 million (including options exercised, cancelled and outstanding);

unless separately approved by independent shareholders at general meeting.

5) Option period A period commencing on the date as specified in the grant letter and expiring on the earliest of the last day of the said period or such time as specified in the scheme and/or the grant letter but not more than 10 years from the date of grant.

6) Minimum No minimum period before the options can be exercised unless otherwise period for imposed by the Board at its absolute discretion. which an option must be held before it can vest

7) Payment on HK$1.00 in cash to be payable on acceptance within 21 days from the date of acceptance of grant. option

8) Subscription To be determined by the Board and shall be at least the highest of: price (a) the closing price of the shares as stated in the Stock Exchange’s daily quotations sheets on the date of the grant of the option, which must be a business day;

(b) the average closing prices of the shares as stated in the Stock Exchange’s daily quotations sheets for the 5 business days immediately preceding the date of the grant of the option; and

9) Life A period of 10 years commencing on 5 September 2012 (being the date on which the scheme is adopted) and expiring on the tenth anniversary of such date, i.e. 5 September 2022.

The Group’s employees, including directors, receive remuneration in the form of share-based payment transactions, whereby the employees rendered services in exchange for shares or rights over shares. The cost of such transactions with employees is measured by reference to the fair value of the equity instruments at the grant date. The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a share option reserve within equity. The fair value is determined using the Binomial option pricing model (the “Model”), taking into account the terms and conditions of the transactions, other than conditions linked to the price of the shares of the Company (“market conditions”).

The cost of equity-settled transactions is recognised, together with a corresponding increase in share option reserve within equity, over the year(s) in which the vesting conditions are to be fulfilled, ending on the date on which the relevant employees become fully entitled to the award. During the vesting period, the number of share options that is expected to vest ultimately is reviewed. Any adjustment to the cumulative fair value recognised in prior years is charged/credited to profit or loss for the year of the review, with a corresponding adjustment to the reserve within equity.

– IV-68 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

The estimated fair values of share options granted by the Company were measured on the dates of grant by using the Model. The Model is one of the commonly used models to estimate the fair value of a share option. The variables and assumptions used in computing the fair value of the share options are based on the management’s best estimate. The value of a share option varies with different variables of certain subjective assumptions. Any change in the variables so adopted may materially affect the estimation of the fair value of a share option.

31. RESERVES

Company

Capital Share Share redemption Contributed option Accumulated premium reserve surplus reserve profits Total Note HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2013 35,383 450 263,441 4,986 108,572 412,832 Shares issued under share option scheme 7,864 – – (2,560) – 5,304 Lapse of share options – – – (1,752) 1,752 – Loss for the year 13 ––––(12,655) (12,655)

At 31 March 2014 43,247 450 263,441 674 97,669 405,481

At 1 April 2014 43,247 450 263,441 674 97,669 405,481 Shares issued under share option scheme 2,066 – – (674) – 1,392 Share issued on open offer 271,843––––271,843 Share issuing expenses (1,197) ––––(1,197) Share options granted – – – 28,107 – 28,107 Lapse of share options – – – (2,798) 2,798 – Loss for the year 13 ––––(20,892) (20,892)

At 31 March 2015 315,959 450 263,441 25,309 79,575 684,734

Dividend

The directors do not recommend the payment of any dividend for the year ended 31 March 2015 (2014: Nil).

Share premium and capital redemption reserve

The application of the share premium account and the capital redemption reserve is governed by the Companies Act 1981 of Bermuda (as amended).

Properties revaluation reserve

When an item of property, plant and equipment becomes an investment property because its use has changed as evidenced by end of owner-occupation, any difference between the carrying amount and the fair value of that item at the date of transfer is recognised in other comprehensive income and accumulated in property revaluation reserve. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to accumulated profits.

– IV-69 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations and is dealt with in accordance with the accounting policies adopted for foreign currency translation.

Enterprise expansion reserve

Enterprise expansion reserve represents a PRC statutory reserve set up by the operating subsidiaries in the PRC. Upon approval by the relevant PRC authorities, the enterprise expansion reserve may be used for increasing the registered capital of the relevant subsidiaries in the PRC.

Contributed surplus

The contributed surplus of the Company arose from the capital reduction in May 2006, which consists of share capital reduction and cancellation of the entire amount of the share premium account of the Company as at 31 March 2005. Under the Companies Act 1981 of Bermuda (as amended), a company shall not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that (i) the Company is, or would after the payment be, unable to pay its liabilities as they become due; or (ii) the realisable value of the company’s assets would thereby be less than its liabilities.

Share option reserve

The share option reserve comprises the fair value of share options granted which are yet to be exercised, as further explained in the accounting policy for share-based payment transactions in the notes to the consolidated financial statements.

32. CASH (USED IN) GENERATED FROM OPERATIONS

2015 2014 HK$’000 HK$’000

Loss before taxation (18,616) (3,359)

Interest income (10,659) (2,632) Interest expenses 16,743 3,747 Gain on disposal of subsidiaries – (13,391) Gain on disposal of club membership – (340) Share of results of associates (2,641) 1,081 Share of results of a joint venture (429) – Depreciation 1,175 762 Bargain purchase on acquisitions of subsidiaries (989) – Change in fair value of investment properties (25,000) (11,000) Write off of doubtful trade and other receivables 54 138 Loss (Gain) on disposal of property, plant and equipment 5 (78) Exchange difference arising on translation 132 (51) Equity-settled share-based payment 28,107 – (Increase) decrease in inventories (28,627) 854 (Increase) decrease in trade and other receivables (22,149) 40,131 Increase in trade and other payables 5,594 1,747

Cash (used in) generated from operations (57,300) 17,609

– IV-70 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

33. BUSINESS COMBINATIONS

(a) Acquisition of 100% equity interest in Shanghai XingJiTong Shi Ye Company Limited

In August 2014, the Group entered into an agreement with a director and a former director of the Group’s wholly-owned subsidiary to acquire 100% equity interest in 上海星際通實業有限公司 (“Shanghai XingJiTong”) (referred to as the “Shanghai XingJiTong Acquisition”) for a consideration of RMB1,500,000 (equivalent to approximately HK$1,896,000) as disclosed in the Company’s announcement dated 20 August 2014.

The principal activity of Shanghai XingJiTong is the provision of services for leading national telecommunication operators in the mobile telecommunication market in Shanghai.

The Shanghai XingJiTong Acquisition represented an opportunity to expand the Group’s telecommunications business and capitalise on its channel advantage to further expand the retailing of electronic products. The fair values of the identifiable assets and liabilities of Shanghai XingJiTong as at the date of acquisition and the corresponding carrying amounts immediately before the Shanghai XingJiTong Acquisition were as follows:

Fair value Carrying recognised on amount acquisition HK$’000 HK$’000

Property, plant and equipment 136 136 Inventories 652 652 Trade and other receivables 2,720 2,720 Cash and cash equivalents 213 213 Trade and other payables (1,490) (1,490) Tax payable (287) (287)

Net assets 1,944 Bargain purchase (48)

1,896

Satisfied by: Purchase consideration: Cash paid 1,896

HK$’000

Net cash flow on acquisition: Net cash acquired 213 Consideration paid (1,896)

(1,683)

Since the date of the acquisition to 31 March 2015, Shanghai XingJiTong contributed turnover and profit after tax of HK$4,784,000 and HK$812,000 respectively. Had the XingJiTong Acquisition taken place at the beginning of the year, there would have been an increase in turnover and profit after tax for the year ended 31 March 2015 by HK$8,850,000 and HK$1,673,000 respectively.

– IV-71 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

The Group incurred acquisition-related costs of HK$363,000 relating to external legal and professional fees have been included in “administrative expenses” of the Group’s consolidated income statement.

The receivable acquired (which principally comprised trade receivable) in these transaction with a fair value of HK$2,720,000 and had gross contractual amount of HK$2,720,000. The best estimate at acquisition date of the contractual cash flow not expected to be collected is HK$ Nil.

(b) Acquisition of 100% equity interest in Shanghai Motion JUNS Communication Technology Company Limited

In July 2014, the Group entered into a conditional agreement with a director and a former director of the Group’s wholly-owned subsidiary to acquire 100% equity interest in 上海潤迅君斯通信科技有限公司 (“Shanghai Motion JUNS”)(referred to as the “Shanghai Motion JUNS Acquisition”) for a consideration of RMB9,000,000 (equivalent to approximately HK$11,325,000) and subject to a price adjustment as disclosed in the Company’s announcement dated 22 July 2014. In November 2014, the Group further entered into a supplemental agreement with the director and former director of the Group’s subsidiary that the consideration will be subject to a completion audit as disclosed in the Company’s announcement dated 11 November 2014. The Shanghai Motion JUNS Acquisition was completed in December 2014.

The principal activity of Shanghai Motion JUNS is the provision of outbound call centre services in Shanghai for a leading national telecommunication operator in the PRC.

The Shanghai Motion JUNS Acquisition represented an opportunity (i) to diversify the Group’s product and service offering in the telecommunication market; (ii) to strengthen the Group’s relationship with the telecommunication operators to whom the Group is serving; and (iii) to capitalise on the business synergy between Shanghai Motion JUNS’s business and the Group’s telecommunications retail sales and management services. The fair values of the identifiable assets and liabilities of Shanghai Motion JUNS as at the date of acquisition and the corresponding carrying amounts immediately before the Shanghai Motion JUNS Acquisition were as follows:

Fair value Carrying recognised on amount acquisition HK$’000 HK$’000

Property, plant and equipment 4,512 4,512 Interest in joint venture 10,168 10,168 Trade and other receivables 5,786 5,786 Cash and cash equivalents 15 15 Trade and other payables (7,985) (7,985) Tax payable (230) (230)

Net assets 12,266 Bargain purchase (941)

11,325

Satisfied by: Purchase consideration: Cash paid 11,325

– IV-72 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

HK$’000

Net cash flow on acquisition: Net cash acquired 15 Consideration paid (11,325)

(11,310)

Since the date of the acquisition to 31 March 2015, Shanghai Motion JUNS contributed turnover and profit after tax of HK$9,666,000 and HK$1,965,000 respectively. Had the Shanghai Motion JUNS Acquisition taken place at the beginning of the year, there would have been an increase in turnover and profit after tax for the year ended 31 March 2015 by HK$19,925,000 and HK$4,300,000 respectively.

The Group incurred acquisition-related costs of HK$2,378,000 relating to external legal and professional fees have been included in “administrative expenses” of the Group’s consolidated income statement.

The receivables acquired (which principally comprised trade receivable) in these transaction with a fair value of HK$5,786,000 and had gross contractual amount of HK$5,786,000. The best estimate at acquisition date of the contractual cash flow not expected to be collected is HK$ Nil.

34. RELATED PARTY TRANSACTIONS

In addition to the transactions and balances disclosed elsewhere in these consolidated financial statements, the Group entered into the following material related party transactions in the ordinary course of the Group’s business.

2015 2014 HK$’000 HK$’000

(i) Key management personnel Compensation for key management personnel, including amount paid to the Company’s directors and certain of the highest paid employees, as disclosed in note 11, is as follows:

– Salaries, allowance and benefit in kinds 9,310 6,931 – Discretionary bonus 76 1,894 – Retirement scheme contribution 395 80 – Termination benefit – 398 – Equity-settled share-based payment 8,854 –

18,635 9,303

(ii) Entities controlled by a close family member of a controlling shareholder of the Company – Project management fee income 18 – – Rental expenses paid 216 24 – Purchase of furniture, fixtures and equipment – 1,160

During the year ended 31 March 2014, an entity controlled by a close family member of a controlling shareholder of the Company assumed rental expenses on premise for a subsidiary of the Company for a period of three and a half month. The monthly rental was approximately HK$327,000.

– IV-73 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

35. FAIR VALUE MEASUREMENTS

The following presents the assets and liabilities measured at fair value or required to disclose their fair value in these financial statements on a recurring basis at 31 March 2015 across the three levels of the fair value hierarchy defined in HKFRS 13, Fair Value Measurement, with the fair value measurement categorised in its entirety based on the lowest level input that is significant to the entire measurement. The levels of inputs are defined as follows:

• Level 1 (highest level): quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date;

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly;

• Level 3 (lowest level): unobservable inputs for the asset or liability.

The Group’s investment properties of HK$340,000,000 (2014: HK$315,000,000) are measured at Level 2 of the fair value hierarchy.

During the year ended 31 March 2015, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Description of the valuation techniques and inputs used in Level 2 fair value measurement

As described in note 15, at the end of the reporting period, the investment properties were revalued by Savills Valuation and Professional Services Limited, an independent professional qualified valuer, on the open market value basis using direct comparison approach by making reference to the comparable market transactions as available in the markets assuming sale with the benefit of vacant possession. The most significant input into this valuation approach is market price per square foot.

36. COMMITMENTS

Commitments under operating leases – the Group as lessee

At the end of the reporting period, the Group had total future minimum lease payments under non- cancellable operating leases, which are payable as follows:

2015 2014 HK$’000 HK$’000

In respect of leased properties: Within one year 10,175 6,083 In the second to fifth years inclusive 9,699 5,484

19,874 11,567

Operating lease payments represented rental payable by the Group for certain of its office premises and retail shops. Leases are negotiated for an average term of two years and rentals are fixed for an average of two years.

– IV-74 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

37. PRINCIPAL SUBSIDIARIES

Details of the principal subsidiaries are as follows:

Country/place of incorporation/ Particulars of operation and issued share kind of legal capital/ Percentage of entity in registered effective equity Name the PRC capital interest held1 Principal activities

Ground Data System Limited Hong Kong 2 ordinary shares of 100% Property holding total HK$2

Ground Holdings Limited British Virgin 100 ordinary shares 100% Investment holding Islands of US$1 each

Ground Properties (HK) Hong Kong 2 ordinary shares of 100% Property holding Limited total HK$2

Jackie Industries Limited Hong Kong 2 ordinary shares of 100% Property holding total HK$2

Victory Marker Limited Hong Kong 6,176,497 ordinary 100% Investment holding shares of total HK$13,966,499

Sino Success Consultants Hong Kong 1 ordinary share of 100% Administration & Limited total HK$1 management services

World Sheen Properties Hong Kong 2 ordinary shares of 100% Property holding Limited total HK$2

上海錦瀚銀通通信產品銷售 PRC, wholly Paid-up capital 100% Provision of 有限公司 foreign-owned RMB500,000 distribution sales enterprise Registered capital and management RMB500,000 services

上海潤迅概念通信產品連鎖銷 PRC Paid-up capital 100% Provision of 售有限公司 RMB30,000,000 telecommunications Registered capital retail sales and RMB30,000,000 management services

上海宏億通信產品銷售 PRC Paid-up capital 100% Provision of 有限公司 RMB500,000 distribution sales Registered capital and management RMB500,000 services

上海潤迅君斯通信科技 PRC Paid-up capital 100% Provision of 有限公司 RMB5,000,000 telecommunications Shanghai Motion Registered capital call centre JUNS Communication RMB5,000,000 services Technology Company Limited#

– IV-75 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

上海星際通實業有限公司 PRC Paid-up capital 100% Provision of Shanghai XingJiTong Shi Ye RMB5,000,000 telecommunications Company Limited# Registered capital retail sales and RMB5,000,000 management services

# English translation for identification purpose only.

1 All interests are held indirectly by the Company except for Ground Holdings Limited which is directly owned by the Company.

The above table includes the subsidiaries of the Company which, in the opinion of the directors, principally affected the results of the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

No debts securities have been issued by the subsidiaries of the Company.

38. EVENTS AFTER THE REPORTING PERIOD

Pursuant to the announcement dated 26 May 2015, the Group entered into a sale and purchase agreement with Ka Yik Investments Limited to acquire the entire equity interest in a company incorporated in British Virgin Islands at a consideration of HK$4,650,000,000. The target company, together with its subsidiaries, engaged in the development, sales and leasing of residential, commercial and tourism properties. Through the acquisition, the Group can leverage on the platform of the target group to accelerate property development business. As at the date of approval of these financial statements, the above acquisition has not been completed.

39. COMPARATIVE FIGURES

Conforming to current year’s presentation, the expense of HK$26,401,000 that were included in administration expenses have been reclassified to distribution costs. The revised presentation reflects more appropriately the nature of these items. This reclassification has no effect on the reported financial position, results or cash flows of the Group.

– IV-76 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

AUDITORS’ REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE TWELVE MONTHS ENDED 31 MARCH 2014

Set out below is the auditors’ report extracted from the annual report of the Company for the twelve months ended 31 March 2014.

To the shareholders of Ground Properties Company Limited (formerly known as China Motion Telecom International Limited) (incorporated in Bermuda with limited liability)

We have audited the consolidated financial statements of Ground Properties Company Limited (the “Company”) and its subsidiaries (together the “Group”) set out on pages IV-79 to IV-135, which comprise the consolidated and the Company’s statements of financial position as at 31 March 2014, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

AUDITOR’S RESPONSIBILITY

– IV-77 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 31 March 2014 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Mazars CPA Limited Certified Public Accountants Hong Kong, 18 June 2014

Chan Chi Ming Andy Practising Certificate number: P05132

– IV-78 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED INCOME STATEMENT Year ended 31 March 2014

2014 2013 Note HK$’000 HK$’000 (Restated)

Continuing operations

Turnover 6 56,211 63,663 Cost of sales and services (16,797) (28,562)

Gross profit 39,414 35,101

Other revenue 6 4,236 3,748 Other net income 7 13,809 4 Distribution costs (1,036) (85) Administrative expenses (65,954) (44,395) Impairment of goodwill – (29,117) Change in fair value of investment properties 11,000 79,000 Finance costs 9 (3,747) – Share of results of associates 20 (1,081) –

(Loss) Profit before taxation 10 (3,359) 44,256

Taxation 12 (497) (1,847)

(Loss) Profit for the year from continuing operations (3,856) 42,409

Discontinued operations Profit for the year from discontinued operations 13 – 40,817

(Loss) Profit for the year (3,856) 83,226

– IV-79 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

2014 2013 Note HK$’000 HK$’000 (Restated)

(Loss) Profit attributable to: Shareholders of the Company – continuing operations (3,850) 42,342 – discontinued operations – 40,876

(3,850) 83,218

Non-controlling interests – continuing operations (6) 67 – discontinued operations – (59)

(6) 8

(3,856) 83,226

(Loss) Earnings per share 15 From continuing and discontinued operations – Basic and diluted (0.68) HK cents 14.75 HK cents

From continuing operations – Basic and diluted (0.68) HK cents 7.50 HK cents

From discontinued operations – Basic and diluted N/A 7.25 HK cents

Details of dividend for the year are disclosed in note 30 to the consolidated financial statements.

– IV-80 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 March 2014

2014 2013 HK$’000 HK$’000

(Loss) Profit for the year (3,856) 83,226

Other comprehensive (loss) income: Items that are or may be reclassified subsequently to profit or loss: Exchange difference on consolidation (50) 413 Reclassification adjustment relating to disposal of subsidiaries (5,011) –

Total other comprehensive (loss) income (5,061) 413

Total comprehensive (loss) income for the year (8,917) 83,639

Total comprehensive (loss) income attributable to: Shareholders of the Company – continuing operations (8,911) 42,755 – discontinued operations – 40,876

(8,911) 83,631

Non-controlling interests – continuing operations (6) 67 – discontinued operations – (59)

(6) 8

(8,917) 83,639

– IV-81 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

STATEMENTS OF FINANCIAL POSITION As at 31 March 2014

Group Company 31 March 31 March 31 March 31 March 2014 2013 2014 2013 Note HK$’000 HK$’000 HK$’000 HK$’000

ASSETS AND LIABILITIES

Non-current assets Investment properties 16 315,000 304,000 – – Property, plant and equipment 17 2,547 1,419 – – Goodwill 18 –––– Interests in subsidiaries 19 – – 730,467 382,550 Interests in associates 20 383,919 – – – Other non-current assets 21 – 3,130 – –

701,466 308,549 730,467 382,550

Current assets Inventories 22 1,580 2,435 – – Trade and other receivables 23 11,514 51,682 176 118 Bank balances and cash 24 38,860 102,099 2,271 60,193

51,954 156,216 2,447 60,311

Current liabilities Trade and other payables 25 17,488 14,805 3,901 1,824 Interest-bearing borrowings 26 145,000 – 145,000 – Taxation 58 49 – –

162,546 14,854 148,901 1,824

Net current (liabilities) assets (110,592) 141,362 (146,454) 58,487

Total assets less current liabilities 590,874 449,911 584,013 441,037

Non-current liabilities Interest-bearing borrowings 26 150,000 – 150,000 – Deferred tax liabilities 27 5,099 4,780 – –

155,099 4,780 150,000 –

NET ASSETS 435,775 445,131 434,013 441,037

– IV-82 – THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

Group Company 31 March 31 March 31 March 31 March 2014 2013 2014 2013 Note HK$’000 HK$’000 HK$’000 HK$’000

CAPITAL AND RESERVES Issued capital 28 28,532 28,205 28,532 28,205 Reserves 30 407,385 410,992 405,481 412,832

Total capital and reserves attributable to shareholders of the Company 435,917 439,197 434,013 441,037

Non-controlling interests (142) 5,934 – –

TOTAL EQUITY 435,775 445,131 434,013 441,037

Approved and authorised for issue by the Board of Directors on 18 June 2014.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY GROUP THE OF INFORMATION FINANCIAL IV APPENDIX Year ended 31 March 2014

Reserves attributable to shareholders of the Company Reserves Properties Capital Enterprise Share Accumulated Non- Issued Share on revaluation Exchange redemption expansion Contributed option (losses) controlling Total capital premium consolidation reserve reserve reserve reserve surplus reserve profits Total interests equity HK$’000 HK$’000 HK$000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 April 2012 28,205 35,383 4,900 9,845 8,537 450 65,434 210,587 4,986 (12,761) 327,361 5,963 361,529

Profit for the year –––––––––83,218 83,218 8 83,226

Other comprehensive income: Exchange difference on consolidation ––––413–––––413–413

Total other comprehensive income ––––413–––––413–413

Total comprehensive income for the year ––––413––––83,218 83,631 8 83,639 V8 – IV-84 –

Disposal of discontinued operations –––––––––––(37) (37) Disposal of investment property – – – (551) –––––551–––

– – – (551) –––––551–(37) (37) HSDCMN SI RF OM H NOMTO OTIE EENI NOPEEADI UJC OCAG.THIS CHANGE. TO SUBJECT DOCUMENT. THIS IS OF AND COVER INCOMPLETE THE ON IS “WARNING” HEREIN HEADED SECTION CONTAINED THE INFORMATION WITH THE CONJUNCTION IN FORM. READ DRAFT BE IN MUST PROOF IS APPLICATION DOCUMENT THIS

Reserves attributable to shareholders of the Company GROUP THE OF INFORMATION FINANCIAL IV APPENDIX Reserves Properties Capital Enterprise Share Accumulated Non- Issued Share on revaluation Exchange redemption expansion Contributed option (losses) controlling Total capital premium consolidation reserve reserve reserve reserve surplus reserve profits Total interests equity HK$’000 HK$’000 HK$000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 31 March 2013 and at 1 April 2013 28,205 35,383 4,900 9,294 8,950 450 65,434 210,587 4,986 71,008 410,992 5,934 445,131

Loss for the year –––––––––(3,850) (3,850) (6) (3,856)

Other comprehensive loss: Exchange difference on consolidation ––––(50) –––––(50) – (50) Disposal of subsidiaries ––––(5,011) –––––(5,011) – (5,011)

Total other comprehensive loss ––––(5,061) –––––(5,061) – (5,061)

Total comprehensive loss for the year ––––(5,061) ––––(3,850) (8,911) (6) (8,917)

Disposal of subsidiaries ––––––(65,434) – – 65,434 – (6,070) (6,070)

Transactions with owners: Contributions and distributions – IV-85 – Shares issued under share option scheme 327 7,864 ––––––(2,560) – 5,304 – 5,631 Lapse of share option ––––––––(1,752) 1,752 – – –

327 7,864 ––––––(4,312) 1,752 5,304 – 5,631

At 31 March 2014 28,532 43,247 4,900 9,294 3,889 450 – 210,587 674 134,344 407,385 (142) 435,775 THIS DOCUMENT IS IN DRAFT FORM. THE INFORMATION CONTAINED HEREIN IS INCOMPLETE AND IS SUBJECT TO CHANGE. THIS APPLICATION PROOF MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. APPENDIX IV FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 March 2014

2014 2013 Note HK$’000 HK$’000

OPERATING ACTIVITIES Cash generated from (used in) operations 31 17,609 (2,848) Interest received 2,632 957 Interest paid (2,779) – Income tax paid (169) (850)

Net cash from (used in) operating activities 17,293 (2,741)

INVESTING ACTIVITIES Proceeds from disposal of property, plant and equipment 346 – Net proceeds from disposal of subsidiaries 33 5,309 – Proceeds from disposal of club membership 340 – Net proceeds from disposal of investment property – 2,717 Net proceeds from disposal of discontinued operations 33 – 839 Purchase of property, plant and equipment (2,158) (1,400) Acquisition of interests in a subsidiary and other assets 32 (300,000) –

Net cash (used in) from investing activities (296,163) 2,156

FINANCING ACTIVITIES New bank loan raised 210,000 – Issue of share capital arising from the exercise of share options 5,631 –

Net cash from financing activities 215,631 –

Net decrease in cash and cash equivalents (63,239) (585)

Cash and cash equivalents at beginning of year 102,099 102,684

Cash and cash equivalents at end of year, represented by bank balances and cash 38,860 102,099

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 31 March 2014

1. GENERAL INFORMATION

Ground Properties Company Limited (the “Company”) is a limited liability company incorporated in Bermuda and the shares of which are listed on Main Board of The Stock Exchange of Hong Kong Limited. With effect from 27 January 2014, the name of the Company was changed from China Motion Telecom International Limited to Ground Properties Company Limited. The Company is an investment holding company. The Company and its subsidiaries (together the “Group”) are principally engaged in provision of telecommunications retail sales and management services, property investment and property development and management, including planning, design, budgeting, licensing, contract tendering and contract administration. The Company’s registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. During the year, the immediate holding company of the Company has been changed from Marvel Bonus Holdings Limited to Charm Success Group Limited which is incorporated in the British Virgin Islands, and is the ultimate holding company of the Company in the opinion of directors.

2. ADOPTION OF NEW/REVISED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSS”)

Adoption of new/revised HKFRSs

The Group has adopted the following new/revised HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) which are effective for the Group’s accounting period beginning on 1 April 2013:

Amendments to HKAS 1 (Revised) Presentation of Items of Other Comprehensive Income HKAS 19 (2011) Employee Benefits HKAS 27 (2011) Separate Financial Statements HKAS 28 (2011) Investments in Associates and Joint Ventures HKFRS 10 Consolidated Financial Statements HKFRS 12 Disclosure of Interests in Other Entities Amendments to HKFRS 10, Consolidated Financial Statements, Joint Arrangements and HKFRS 11 and HKFRS 12 Disclosure of Interests in Other Entities: Transition Guidance HKFRS 13 Fair Value Measurement Amendments to HKFRS 13 Annual Improvements to 2012 Cycle – Fair Value Measurements Amendments to HKFRSs Annual Improvements to HKFRSs 2009-2011 Cycle Amendments to HKFRS 7 Disclosure – Offsetting Financial Assets and Financial Liabilities

Except as described below, the application of the new and revised HKFRSs in the current year has had no material impact on the Group’s results and financial positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

Amendment to HKAS 1 (Revised): Presentation of Items of Other Comprehensive Income

The amendments to HKAS 1 (Revised) require entities to group together items within other comprehensive income that will not be reclassified to profit or loss separately from items that may be reclassified subsequently to profit or loss if certain conditions are met. Other than the presentation changes, the application of the amendments does not have an impact on the amounts recognised.

Further, these amendments change the title for “income statement” to “statement of profit or loss” and “statement of comprehensive income” to “statement of profit or loss and other comprehensive income”. However, HKAS 1 (Revised) retains the option to use titles for the statement other than those used in HKAS 1 (Revised). The Group continues to use “income statement” and “statement of comprehensive income”.

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HKFRS 12: Disclosure of interest in other entities

HKFRS 12 sets out in a single standard all the disclosure requirements relevant to interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. In general, the disclosures required by HKFRS 12 are more extensive than those previously required by the respective standards. The application of HKFRS 12 has resulted in more extensive disclosures as set out in notes 19 and 20 to the consolidated financial statements.

HKFRS 13: Fair value measurement

This new standard improves consistency by providing a single source of guidance for fair value measurement and disclosures about fair value measurement when such measurement is required or permitted by other HKFRSs. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In accordance with the transitional provisions, the standard has been applied prospectively. Apart from the additional disclosures about fair value measurements for the current year set out in note 35 to the consolidated financial statements, the application of the new standard does not have any material impact on the amounts recognised.

Impact of new/revised HKFRSs not yet effective

Amendments to HKAS 27 (2011), Investment Entities (Note a) HKFRS 10 and HKFRS 12 Amendments to HKAS 32 Presentation – Offsetting Financial Assets and Financial Liabilities (Note a) Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets (Note a) Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge Accounting (Note a) HK(IFRIC) – Int 21 Levies (Note a) Amendments to HKAS 19 (2011) Defined Benefit Plans – Employee Contributions (Note b) Various HKFRSs Annual Improvements Project – 2010-2012 Cycle (Note c) Various HKFRSs Annual Improvements Project – 2011-2013 Cycle (Note c) HKFRS 14 Regulatory Deferral Accounts (Note d) Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations (Note d) Amendments to HKAS 16 and Clarification of Acceptable Methods of Depreciation and HKAS 38 Amortisation (Note d) HKFRS 9 Financial Instruments (Note e) Amendments to HKFRS 9, Financial Instruments (Hedge Accounting and Amendments to HKFRS 7 and HKAS 39 HKFRS 9, HKFRS 7 and HKAS 39) (Note e)

Notes:

a. Effective for annual periods beginning on or after 1 January 2014

b. Effective for annual periods beginning on or after 1 July 2014

c. Effective for annual periods beginning on or after 1 July 2014, except for certain amendments which are effective prospectively for relevant transactions occurred on or after 1 July 2014

d. Effective for annual periods beginning on or after 1 January 2016

e. No mandatory effective date determined but is available for adoption

The directors do not anticipate that the adoption of these new/revised HKFRSs in future periods will have any material impact on the results of the Group.

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3. PRINCIPAL ACCOUNTING POLICIES

Basis of preparation

These consolidated financial statements have been prepared in accordance with HKFRSs, which collective term includes all applicable HKFRSs, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the HKICPA, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

These consolidated financial statements have been prepared on a basis consistent with the accounting policies adopted in the 2013 consolidated financial statements except for the adoption of the new/revised HKFRSs as set out in note 2 to the consolidated financial statements that are relevant to the Group and effective from the current year. A summary of the principal accounting policies adopted by the Group is set out below.

Going concern

The consolidated financial statements have been prepared in conformity with the principles applicable to a going concern basis. The applicability of these principles is dependent upon continued availability of adequate finance or attaining profitable operations in the future in view of the excess of current liabilities over current assets by HK$110,592,000 at the end of the reporting period.

In order to improve the Group’s financial position, immediate liquidity and cash flows, and otherwise to sustain the Group as a going concern, the directors of the Company have been actively seeking new sources of funding on both equity and debt financing to cover the temporary operating deficit. Subsequent to the end of the reporting period, the Company had successfully obtained additional cash of approximately HK$284,000,000 from the open offer as announced on 28 March 2014.

In the opinion of the directors, in light of the measures taken to date, together with expected results of other measures in progress, the Group will have sufficient working capital for its current requirements and it is reasonable to expect the Group to return to a financially viable going concern. Accordingly, the directors are satisfied that it is appropriate to prepare the financial statements on a going concern basis, notwithstanding the Group’s financial and liquidity position at 31 March 2014.

Basis of measurement

The measurement basis used in the preparation of these consolidated financial statements is historical cost, except for investment properties, which are measured at fair value as explained in the accounting policies set out below.

Basis of consolidation

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions are eliminated in full. The results of subsidiaries are consolidated from the date on which the Group obtains control and continue to be consolidated until the date that such control ceases.

Non-controlling interests are presented, separately from owners of the parent, in the consolidated income statement and within equity in the consolidated statement of financial position. The non-controlling interests in the acquiree, that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in event of liquidiation, are measured initially either at fair value or at the present ownership interest’s proportionate share in the recognised amounts of the acquiree’s identifiable net assets. This choice of measurement basis is made on an

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acquisition-by-acquisition basis. Other types of non-controlling interests are initially measured at fair value, unless another measurement basis is required by HKFRSs.

Allocation of total comprehensive income

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in ownership interest

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Repairs and maintenance are charged to profit or loss during the year in which they are incurred.

Furniture, fixtures and office 20% – 33% equipment Telecommunications equipment 20% Leasehold improvements Over the unexpired term of leases Motor vehicles 30%

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net sale proceeds and the carrying amount of the item) is included in profit or loss in the year in which the item is derecognised.

Investment properties

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on a valuation by an independent valuer who holds a recognised professional qualification and has recent experience in the location and category of property being valued. The fair value is based on market value, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net sale proceeds and the carrying amount of the asset) is included in profit or loss in the year in which the item is derecognised.

Subsidiaries

Associates

The Group’s investment in associate is accounted for under the equity method of accounting, except when the investment or a portion thereof is classified as held for sale. Under the equity method, the investment is initially recorded at cost and adjusted thereafter for the post-acquisition changes in the Group’s share of the investee’s net assets and any impairment loss relating to the investment. Except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee, the Group discontinues recognising its share of further losses when the Group’s share of losses of the investee equals or exceeds the carrying amount of its interest in the investee, which includes any long term interests that, in substance, form part of the Group’s net investment in the investee.

Unrealised profits and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.

Goodwill

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amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree, if any, after reassessment, is recognised immediately in profit or loss as a bargain purchase. In respect of an associate or a joint venture, any excess of the Group’s share of its net fair value of identifiable assets and liabilities over the cost of investment is recognised immediately as income.

Discontinued operations

A discontinued operation is a component of the Group that comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Group. It represents a separate major line of business or geographical area of operations, or is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. It also occurs when the operation is abandoned.

Other non-current assets

Club debentures represent intangible assets with indefinite useful lives and are stated at cost less accumulated impairment losses.

Financial instruments

Recognition and derecognition

Financial assets and financial liabilities are recognised when and only when the Group becomes a party to the contractual provisions of the instruments and on a trade date basis.

A financial liability is derecognised when and only when the liability is extinguished, that is, when the obligation specified in the relevant contract is discharged, cancelled or expires.

Classification and measurement

1) Loans and receivables

Loans and receivables including bank balances and cash and trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are not held for trading. They are measured at amortised cost using the effective interest method, except where receivables are interest-free loans and without any fixed repayment term or the effect of discounting would be insignificant. In such case, the receivables are stated at cost less impairment loss. Amortised cost is calculated by taking into account any discount or premium on acquisition over the period to maturity. Gains and losses arising from derecognition, impairment or through the amortisation process are recognised in profit or loss.

2) Financial liabilities

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Impairment of financial assets

Cash equivalents

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue and costs, if applicable, can be measured reliably and on the following bases:

(i) Revenue from the sale of telecommunications equipment and products is recognised on the transfer of ownership, which generally coincides with the time of delivery.

(ii) Commission income is recognised in accordance with the terms of agency agreements which is generally when the agency services are rendered.

(iii) Telecommunications retail sales and management services income is recognised when the services are rendered.

(iv) Rental income is recognised on a straight-line basis over the period of the respective leases.

(v) Interest income from financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Foreign currency translation

• Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that end of the reporting period.

• Income and expenses for each income statement are translated at the average exchange rates for the year.

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Inventories

Impairment of non-financial assets, other than goodwill

At the end of each reporting period, the Group reviews internal and external sources of information to assess whether there is any indication that its property, plant and equipment and other non-current assets may be impaired or impairment loss previously recognised no longer exists or may be reduced. If any such indication exists, the recoverable amount of the asset is estimated, based on the higher of its fair value less costs to sell and value in use. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the smallest group of assets that generates cash flows independently (i.e. a cash-generating unit).

The accounting policy for recognition and reversal of the impairment loss for goodwill is stated in the accounting policy for goodwill in the earlier part of this note.

Leases

Rental receivables under operating leases are credited to profit or loss on a straight-line basis over the term of the relevant lease.

Rental payables under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease.

Employee benefits

Short term employee benefits

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Defined contribution plans

Long service payments

Share-based payment transactions

Equity-settled transactions

The Group’s employees, including directors, receive remuneration in the form of share-based payment transactions, whereby the employees rendered services in exchange for shares or rights over shares. The cost of such transactions with employees is measured by reference to the fair value of the equity instruments at the grant date. The fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in a reserve within equity. The fair value is determined using the binomial model, taking into account the terms and conditions of the transactions, other than conditions linked to the price of the shares of the Company (“market conditions”).

Taxation

The charge for current income tax is based on the results for the year as adjusted for items that are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, any deferred tax arising from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting profit nor taxable profit or loss is not recognised.

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Deferred tax is provided on temporary differences arising on investment in subsidiaries and associates, except where the timing of the reversal of the temporary differences is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.